Sale of public land Contents

2Strategy and proceeds

23.The government does not have a standalone strategy for managing land disposals.54 Instead, it has a strategy for managing the entire government estate, with land disposals being a subset of this.55 We asked the Department whether the lack of strategy had resulted in the failure to meet the 160,000 land for homes target. The Department disagreed, asserted that there was not a lack of strategy, but acknowledged that this was a complex area with a lot of programmes and interventions.56 The Department said that there was a hierarchy in place and the responsibilities for programme delivery are all documented.57

24.There are potential tensions between the government’s two land disposal targets—selling land to maximise the number of new homes may not produce the highest proceeds.58 The Department told us that at a strategic level, government had to make choices about the use of land and whether it should be used for housing, commercial ventures or remain in the public sector.59 The Department added that these decisions needed to be made largely at the outset by the individual departments.60 Both the Department and the Cabinet Office stated that they were not aware of examples of departments disagreeing or having to choose between the two targets.61

25.Homes England said that any potential tensions were unlikely to materialise in practise because very often, outside certain low-value locations in the north, housing was likely to be the highest value option.62 The Department told us that departments were now required to produce an annual Strategic Asset Management Plan (SAMP), setting out how departments will use their land and property to meet the government’s wider estate objectives.63 It told us that through this process government resolved any trade-offs between the use of land and maximising proceeds.64 Government does not publish entire SAMPs, which means it is not possible to scrutinise how departments decide between prioritising building homes or maximising proceeds.65

26.While the Department did not consider there to be any significant tensions between the two disposal targets, it did acknowledge that there were trade-offs between achieving the proceeds target and the delivery of affordable homes. The Department told us that increasing the expected number of affordable homes to be built on a site reduced the proceeds from selling the land.66 The Department confirmed that it does not carry out cost-benefit analysis to determine which of its programmes to prioritise, although it did perform this type of analysis to decide the best way to invest in housing.67

27.The Cabinet Office told us that the two disposal targets were not set up in parallel and that the disposal target was not related directly to the £5 billion target.68 It told us that in the future, the Cabinet Office expected the SAMPs to more closely link the deliverability of the land, its potential value and the potential use of the land which would result in “a much more cohesive, coherent and deliverable set of targets”.69

Use of proceeds

28.We asked the Treasury where the money from the sale of land and property was spent. The Treasury’s budgeting rules dictate that under specific conditions some, if not all, proceeds from land sales were transferred to the Treasury.70 These proceeds are gathered into a central fund and then reallocated across government or used to reduce borrowing levels.71 The Treasury told us that as a general rule, it did not match specific receipts with specific expenditures, so it could not trace specific sales. However, it said that with land disposals, it discussed planned sales at a departmental level as part of the budgeting process during spending reviews.72 The Treasury allocated budgets to each department which took into account the expected proceeds from land sales.73 The Treasury told us these proceeds are typically used to finance a department’s investment programme, but this was not always the case.74

29.The Treasury told us that its approach can be different for specific, large land disposals, which were often “negotiated one-off” discussions with the Treasury to determine the appropriate treatment of any proceeds, balancing all the other pressures on the public finances.75 For example, the Treasury told us that when the Cabinet Office sold Admiralty Arch for £65.5 million, it agreed that the money would be returned to the Treasury’s central fund to reduce government borrowing.76 In comparison, it told us that when the Foreign Office sold the Bangkok Embassy, it agreed that the proceeds would be reinvested back into the Foreign Office’s estate.77 The Treasury also told us that it does not have specific targets for how proceeds are used across government. It does not determine at an aggregate level how much of the £5 billion proceeds target will remain with departments or how much will be released back the Treasury’s central fund.78

30.We asked the Treasury whether its approach to reflecting land sales within departments’ budgets created an incentive for departments to delay selling land if they might not be entitled to keep all the proceeds. The Treasury told us that the government was conducting a balance sheet review examining the entirety of the Government’s assets and liabilities and determine how departments can best use their assets and liabilities to deliver public value. The Treasury said that this review, together with the requirement to produce SAMPs, will help to make sure departments “do the right thing” in terms of selling public sector land.79

54 C&AG’s Report, para 1.3

55 C&AG’s Report, para 1.3

56 Q69

57 Q68

58 C&AG’s Report, para 1.12

59 Q50

60 Q50

61 Qq51, 53, 54, 65

62 Q55

63 C&AG’s Report, para 1.6

64 Q65

65 C&AG’s Report, para 1.6

66 Q127

67 Q134

68 Q117

69 Q117

70 C&AG’s Report, para 3.11

71 Qq 122, 123

72 C&AG’s Report, para 3.10, Q122

73 C&AG’s Report, para 3.10

74 Q122

75 Qq 122–123, 125

76 Qq 122–123, C&AG’s Report, Figure 12

77 Q122

78 Q125

79 Q126

Published: 24 July 2019