Local Authority Property: Management

HL Deb 13 April 1988 vol 495 cc1069-96

3.9 p.m.

Lord Dean of Beswick rose to call attention to the report Local Authority Property—A Management Overview issued by the Audit Commission; and to move for Papers.

The noble Lord said: My Lords, it is rather strange that a matter which is so important to our standing in public life seems to have attracted so little attention in your Lordships' House. I am more than surprised that, with the wealth of talent—I am not saying this in a sarcastic manner—on the Government Back-Benches related to local government and the building industry, not one Back-Bencher on the other side has seen fit to participate in the debate. It is with a certain amount of sadness that I make those remarks.

Why have I chosen such a subject for debate? The report covers all the property, other than housing, under the control of the management of local councils. On a number of occasions over the past two years your Lordships' House has thoroughly debated and ventilated the question of the housing stock in the public sector and the dangerous deterioration in standards because of lack of maintenance, and so forth. There is no point in dwelling on that matter; nor is it specifically a part of the report.

The valuation that has been put on the properties gives a small indication of the subject which we are debating. The report quantifies in a global sum the valuation of the properties at £100 billion. It is for that reason that I am saddened that the report has not been received by some of the Government Back-Benchers who must have views on the subject.

I should like to list some of the properties in local government which make up such a substantial figure. The report lists them as follows: 22,000 primary schools; 4,500 secondary schools; 550 polytechnics and colleges of further/higher education; 3,500 libraries; 20 airports; 200 crematoria; 3,500 police operational buildings; 17,500 police houses; 1,500 fire stations; 3,500 offices; 4,500 social service homes; 1,000 day centres; 500 adult training centres; 1,500 swimming pools and leisure centres; 155,000 small holdings; and 100,000 urban parks and open spaces. The report goes on to state that a county council could be deemed to have a number of properties valued at £449 million, and that the average metropolitan district council could have a number of properties valued at £244 million. There would be a variation but the report draws a norm across all the counties. Therefore one can understand that these assets are most valuable. In terms of our infrastructure they play a vital part in the way in which we as a nation conduct ourselves and in reaching the standards that we wish to attain in giving service to our people.

I sought the advice of various people and bodies which deal with the problem. In order to bring some rationale into my speech, I first sought the advice of the Institute of Maintenance and Building Management. The body comprises the local authority managers of direct works departments and it is at the sharp end of any operation dealing with such properties, whether or not they go to the private sector in the future. That body has been dealing with the problem over a number of years.

I have also cast my mind back to the NEDC report published in 1985 which dealt with the subject of investment in the public sector built infrastructure. All the reports reach the same conclusion. It is that there is an acceleration in the deterioration of the properties which is most dangerous if not dealt with. I shall not enter into any detail as regards the educational establishments which make up the biggest single unit in the report. I believe that my noble friend Lord Peston will go down that road with a far wider expertise on the subject.

The NEDC report of 1985 stated: As a result of the large post-war school building programmes, less than 10 per cent. of secondary and 20 per cent. of primary schools today consist entirely of pre-1945 accommodation. However, the age of the stock is not an indication of its structural condition and the more recently erected stock is already of some concern to LEAs. Even where older schools are structurally sound, they may have inadequate lighting, heating, plumbing and wiring systems and lack the space or facility requirements of modern teaching".

Another part of the report states that some children are being taught in schools which, by most standards, would be considered to be structurally dangerous if they are not considered to be so already. During the 20-year period from 1950 to 1970 the school building programme suffered in the same way as did the house building programme. The systems and designs then used on buildings should not have been foisted on the public sector. Successive governments of all colours were warned that they were investing in trouble. No notice was taken but the warning is now catching up with us.

The report talks in terms of "sitting on a time bomb". That phrase appears in the report; it is not my phrase. We as a nation are sitting on a time bomb if we do not deal with the problem and make resources available for local authorities. It is for local authorities to decide how to tackle the problem, whether it is done through their own departments or put out to tender as instructed in the recent Local Government Bill. A start must be made because if we do not now start to defuse the time bomb, I suspect that it will become so large that it will be undefusable. The sums of money which will be required when it must be tackled not from choice but from necessity will be of such proportions that they will be frightening to behold.

A calculation was made in, I believe, 1969 to base maintenance figures on 1.8 per cent. of valuations. As I understand the matter, they were not real valuations but were paper valuations. I believe that anyone involved in building will know that the only way in which a true valuation can be obtained is by having a property thoroughly surveyed by a professional. The necessary repairs can then be quantified and a realistic financial figure can be put to the client or the local authority.

It is said that the annual sum spent on the maintenance of such buildings must rise immediately to 40 per cent. That is a tremendous amount. It has been put forward by professional bodies which have no particular axe to grind other than to tell us what we ought to be doing. I have sought the advice of the private sector but unfortunately—it may be because Easter has intervened—I have not received replies. I know that in producing this report the local government Audit Commission has done the nation a favour. This is one of a number of reports it produces periodically. It has produced one on housing, another on educational buildings. Those reports illustrate what we should be doing as a nation to deal with this situation.

One matter worries me. I ask the Government to look earnestly at the question of providing increased public expenditure in this particular sphere. It would be a first-class investment. There would be no wasted money and employment opportunities would be created. I wonder whether the Government might start to look again at the amount of capital assets raised by local authorities to which they are allowed only limited access for specific reasons. Perhaps they should be allowed some of that money for this specific purpose. That is the financial argument.

There is another argument. To try to see the rationale of this matter I contacted three London boroughs. I do not want anyone to think that I went into the centre of London. The boroughs were outer London boroughs, at least one of them Conservative controlled. Their building departments—historically, the foremost trainers of trade apprentices going into the industries—say that despite all the government training schemes for apprentices in the building industry and despite a new intake of people every year, the number of skilled building operatives is falling dramatically. If we allow this situation to develop further, even if the resources are made available we may well be faced with a situation where there will not be sufficient resources in terms of skilled labour to deal with the situation.

I should have liked to say much more. However, in the spirit of normal conduct in this House, I shall have to leave the subject shortly. I said that I would not speak about housing. But only this morning I received from those who produced the report a document called Audit Commission Management Papers: The Competitive Council. Under the heading, "People no longer accept that the council knows best," the document states: Things have changed. There may still be major gaps between needs and services, but councils' customers are more demanding and less grateful. They are also better informed, and better able to articulate their demands. People no longer accept that the council knows best. Scarcely a week passes without some major criticism of council services, criticisms which (unlike those of the NHS) focus more on quality than on quantity. Council flats built to meet the quantitative targets of the 1960s are no longer regarded as habitable, and are being expensively demolished".

That is the subject on which I wish to conclude. His Royal Highness the Prince of Wales, on a number of occasions recently, has expressed misgivings about what is taking place in the housing sphere. When one refers to these particular types of flats, that is what His Royal Highness is talking about. The sad fact is that some flats built less than 20 years ago are now having to be written off with full loan charges still having to be met by existing council house tenants who have no choice in the matter.

I, along with other people involved in public sector housing have drawn attention to this problem for years. No one has listened or bothered about it. I am glad that the Prince of Wales has seen fit to stand and be counted and to give an honest non-political opinion. It saddened me watching "Panorama" on Monday night that a prominent member of the Conservative Party questioned the right of the Prince of Wales to criticise actions that might be deemed criticism of the Government. The last politician I recall who tried to stop everyone, whoever they were, criticising him triggered off a world war with the result that 60 million people died. I hope that ex-Ministers or Ministers of Her Majesty's Government will be big enough and have broad enough backs to accept criticism from whoever it comes and will not regard it as a personal insult against their integrity. I beg to move for Papers.

3.26 p.m.

Lord Ezra

My Lords, I should like to congratulate the noble Lord, Lord Dean of Beswick, on giving us the opportunity today to debate this very important report. Had it not been for his initiative, I believe that we would have passed over without comment a report which raises very important issues. As he has rightly told the House, this concerns £100 billion of the assets of the country. If we were not concerned with the way in which those assets were being maintained and refurbished, I think we should be failing in our duty as a responsible House of Parliament.

I am also glad that the noble Lord paid tribute to the work of the Audit Commission. I regard it as one of the most valuable institutions in this country at the present time. It has produced a number of reports of a compelling nature which have gone into subjects of great importance on the basis of very careful analysis. It has presented those reports in a simple and clear manner which all can understand.

Therefore, the issue before us today in debating this report is to find out from the Government what their attitude towards the report is to be. I very much hope that it will not be just another document which will find its way into the overflowing pending tray and that it will be taken seriously. As the report suggests, there is action to be taken by the Government and there is action to be taken by local authorities to ensure that this vast national asset should be properly cared for. Therefore, both directly and indirectly, by stimulating local government I believe that the Government have a role to play in their response to this report.

Some of the problems to which attention is drawn require a little thought. The noble Lord, Lord Dean, has already referred to what is described as the "maintenance time bomb". All of us who live in homes of our own, whether rented or owned, realise that maintenance in time is very sensible. If one has a leaking roof, one allows it to continue to leak and eventually one is forced to deal with it, then the cost will be several times greater than if one had dealt with it earlier. Therefore, it does not require a great deal of imagination to know that on the question of maintenance the answer is to deal with the problems of deterioration early.

However, unfortunately with regard to our public buildings, according to this report and indeed previous reports such as the NEDC report to which the noble Lord referred, we as a nation have not pursued a policy which we as individuals pursue. I believe that we must grapple with this problem of the "maintenance time bomb" so that we do not leave some future generation to deal with a problem on a scale which would be far greater than if we were to tackle it now. Therefore, we should hear about how this build-up of maintenance work is to be tackled either by direct action by the Government or indirectly by their stimulating local authorities to take the necessary action.

Then there is the question of the disposal of surplus property. There is a large amount of surplus property and there are varying ways in which this is dealt with. There is no doubt that local authorities vary in their skill and in the level of interest which they take in these matters. But they operate within an environment set by central government. This environment is not necessarily conducive to stimulating effective property disposal. The fact is that the proceeds from the sales of property are limited in the extent to which the local authority concerned can make use of them. I believe that this is something that needs to be reviewed.

I quote from the audit report. It says that not only is there a limitation in the disposal of funds—and I am referring to page 21, paragraph 43 of the first volume—but that, There should also be greater recognition of the need to raise capital in order to undertake investment schemes which in the long run will save both revenue and capital resources (particularly in relation to energy saving)". The report states that this could be done by stimulating—it does not need extra revenue or resources to be made available—local authorities to dispose sensibly of surplus properties and to be able to use the proceeds thereof for the purpose of new capital expenditure wherever it might be required.

If I may refer to my personal experience, when I was at the Coal Board there was a large amount of surplus property in the coal industry at any one time. I felt very keenly that we should not immobilise the land and the buildings which were no longer required for operational purposes. I set up a separate company whose task it was to dispose of these surplus properties and also to assure the board that everything that was surplus to requirements got into its hands. We laid down very specific operational requirements for all our properties, and this worked very well because, as its objective, the company had to market the properties that were surplus to the best advantage.

However, there was one disincentive in doing all this. We raised several million pounds a year by these sales but by the extent to which we raised this capital, our capital allocation was reduced. I did not regard that as a very great incentive. Had I been in private business I would have had that extra capital to invest—in the case of the coal industry in very desirable mining projects which we were unable to handle because of that limitation. Nevertheless, that is what we did.

There is another problem which local authorities have to face these days and that is the mass of new legislation to which this report refers. There are the problems that will be created by competitive tendering, however desirable that may be. That subject needs a new approach. There is the matter of increased financial delegation and the possible opting out of schools. All these issues will put an additional strain on local authorities. It means that they will have to be organised in order to take these problems on board. Local authorities should be very carefully oriented in the way of being able to deal effectively with their property problems in order to be able to release them to deal with these other developments.

Above all, the report is very valuable in drawing our attention to the changing social scene against which the local authorities now have to operate. We have major demographic trends in this country which mean that the balance of providing services for the young is shifting to providing more services for the elderly. This is going to mean a major adaptation. Here again it is a question of priorities; it is a question of local government being free to deal with the new social priorities. Instead of having a problem running their existing buildings and being unable to do so due to undue capital restriction, they should be able to carry on with a proper property management system. Furthermore, in the treatment of the mentally handicapped, for example, the trend is away from residential to community care. This matter is also going to raise problems.

I believe that this report is extremely valuable in drawing our attention not only to the deficiencies in the present system in relation to the management of public buildings, but it enables us to study this problem against the changing social framework. We need to achieve what in the report is described as an "active property management system", which requires effort both on the part of central government to set the right framework and to provide the right incentives and on the part of local authorities. Some of the latter, as the audit report clearly demonstrates, are more effective, so their example should stimulate others. In order to do that we need a combined effort and then I believe that local authorities can spend more of their time coping with the social change which is occurring around them.

One of the areas in which considerable savings can be made is in the energy sector. The Audit Commission produced a very valuable report in November 1985 on this specific subject. It drew attention to a number of possibilities which, if pursued, could lead to savings of up to 17 per cent. on the expenditure of energy, which at the time amounted to nearly £1 billion a year. Specifically, what it said was that expenditure on energy efficiency measures needed to be doubled from the then level of £40 million to £80 million. In the context of the present debate, therefore, I believe it is not unreasonable to ask what action has been taken on the basis of the recommendations made by the Audit Commission in its energy report of November 1985 relating to public buildings. Have the suggested measures been taken and have the savings been generated?

Finally, in my opinion the Audit Commission comes to some very good conclusions. They are conclusions which will enable us as a nation which owns these assets to be more secure in the knowledge that they are being better handled. The commission makes four recommendations. First, it recommends that there should be a clear strategy within each local authority for dealing with its property portfolio. The Audit Commission makes the very good point that although properties are owned and operated for different purposes—such as schools, public libraries and so on—there should be no barriers against running a property portfolio as a whole. There should be no possessiveness on the part of any particular department in a local authority. That has been one of the problems. That is what a clear strategy would involve.

This recommendation is at the level of the councils themselves. Below council level, at official level, there is a need to make sure that there is a professional operation of the property portfolio. The officers who operate the portfolio should have a clear knowledge and understanding of the job that they have to do and they should tackle it in the spirit of the strategy laid down.

Those are two tasks for local authorities, but there is also a task for central government. The task for central government is to set the scene right. The system of capital controls, according to the audit report, is too restrictive. Not only is it too restrictive but it is uncertain. The number of changes that have been made year by year have created an atmosphere of uncertainty in the vital area of how much capital from realised sales can be reinvested in essential tasks. This uncertainty should be removed. If we want local authorities to develop an effective continuing strategy they should be able to do so within a continuing strategy applied by government. The two must go together. There should also be on the part of government a greater recognition of the need to undertake capital investment schemes so that we can build for the future. Such schemes would pay off in the long-term.

The Treasury, as the body which cares for our interests in financial terms and does valuable work, is nevertheless restrictive in some of its approaches. I am personally involved with one local authority which has set up a combined operation with the private sector. It has asked me to be the independent chairman of the operation, which happens to be an energy saving scheme. We have devised ways to save a great deal of money on energy and have worked out methods of raising the capital efficiently from external sources. However, we have recently been advised that, even though we are a joint company, any capital that is raised will come off the local authority's capital allocation. I do not believe that that is the right spirit in which we should be doing these things. For goodness sake, if it is right to save energy, if it is right to introduce the private sector and have joint arrangements, which I fully support, I do not believe that the restrictions of the Treasury should apply willy-nilly. I quote that as an example of the ways in which the Government should create the right framework.

I should like to end on a positive note. This is one of the most important reports in relation to the assets of the country to be produced in recent times. It has made a number of valuable suggestions both in relation to local authorities and central government. These recommendations are based on careful analysis, the details of which are set out in the second volume of the report. Therefore I very much hope that when he comes to reply the Minister will say that the Government take this extremely seriously and that they are proposing to introduce a number of measures to carry out the recommendations.

3.42 p.m.

Lord Peston

My Lords, I should like to congratulate my noble friend Lord Dean of Beswick on introducing this important debate. The report by the Audit Commission Local Authority Property—A Management Overview is interesting, and, as the noble Lord, Lord Ezra, said, rather important. I hope that the Government will take it seriously. It is a great pity that more noble Lords have not seen fit to take part in the debate in order to elucidate many aspects of this subject. I hope that the Audit Commission will not regard this as lack of encouragement in terms of its extremely good work.

The problem before us is a general public sector problem; it is not just a matter for local authorities. It is not a problem unique to the present Government. However, in so far as the present Government are the government we have, it is to them that we must address our criticisms and our demands for action. The problem goes back a long way. It is connected with the general question of gross domestic fixed capital formation or investment in the public sector and with the fact that when governments are under pressure they find it easier to cut investment rather than other forms of expenditure. In that way those whose investment is cut find it much easier to do away with things like maintenance and to forget about proper economic decision-making for property, because the chickens will not come home to roost until some time in the future. Therefore, cuts are made in those areas and not in others.

The problem of public sector management here seems to lead to a series of irrationalities. We have major national assets—a figure of £100 billion has been referred to in respect of local authority property—but we do not manage those assets as well as they could be managed. We do not have the appropriate incentives for people to manage them.

From the general macro-economic point of view, the failure to do the thing properly is a further disappointment because it would make good sense for the Government to intervene in such an area. The improvement and construction of buildings provide employment which one thinks is a good thing. And that employment, apart from being intrinsically good in itself, contains a much lower import content than many of the other things we might be doing. Therefore, we do not produce the balance of payments pressures that might result if we raised public expenditure elsewhere.

I should like to turn to the specific problem of education. I hope that noble Lords will bear with me if I speak not merely about local authority buildings, such as schools, colleges and so on, but also about central government and the universities, because exactly the same problem arises for buildings in universities as in the schools. I refer to the lack of maintenance and deterioration. One does not have to look simply at the figures of fixed investment in real terms to know how that that has been unduly low in gross terms and therefore how lower still is the net figure. One does not have to look simply at the figures to see the nature of the problem. One has merely to walk around our public buildings, particularly the universities.

The university to which I have belonged all my life, London University, is full of buildings that are not terribly clean and not in a very good state of repair. Roofs leak. As the noble Lord, Lord Ezra said, it is easier to leave the roof leaking for a while because that does not cost anything other than inconvenience. Eventually, one ends up with a major bill. But if the pressure is on to economise, that is the easiest area in which to do so. This is a pity not only in economic terms. It is a pity that the public sector should become shabby and that our image to the world should appear so unattractive because we do not manage our properties appropriately.

I have spoken about colleges and universities but the key area that I should like to emphasise is that of schools and polytechnics. I do not say that this is the result solely of the present Government's failures. It goes back a long time. Nonetheless that does not mean that the time is now not right to change. Research has shown that many school buildings are physically dangerous. Happily, no damage has so far occurred to the young people in those buildings; but we should not take the risk. More to the point, there is evidence in the metropolitan districts that the poor quality of some school buildings is such that it has an adverse effect on the quality of education provided in them. Far too many buildings are not good enough for education purposes.

We hear of teachers and education generally being criticised—and there may be some grounds for that—but in many metropolitan areas teachers are working and students are being asked to learn in appalling physical conditions. It is not surprising that sometimes the performance in those places is a good deal worse than we should like.

I should add en passant that we have a further problem with such buildings—the problem of vandalism. I find that problem very difficult to understand; it is not something for which I have an easy remedy. However, to the extent that buildings are vandalised, the cost of maintaining and keeping them in a reasonable condition will rise to an even higher level. That is not just a matter which concerns schools in the primary and secondary sense. Evidence shows in the case of local authorities that the accommodation available for adult and youth education is also unsatisfactory as the property similarly deteriorates. So action must be taken.

If we think of further and higher education in the public sector, the problem also exists there. It all stems from the ease—I cannot emphasise this too strongly—with which one avoids meeting the maintenance requirement because one has so many other pressures on one's resources. As I have said, it is far too easy not to clean a building and make it good when there are so many other calls on available funds.

As I understand it, some authorities—this factor is more worrying still—have simply given up proper rational maintenance schedules. They operate on an ad hoc basis. Should something go wrong and they can patch it up, because there are funds available, they do so. If they cannot, they do not do so. That is not a sensible way to manage public sector assets. It is certainly not a way to manage them with a view to gaining a proper economic return from them for the benefit of the nation.

I do not say that all such problems arise from lack of funds. There is a genuine need to improve the quality of management. I accept that a type of expertise is required which may not often be available in all local authorities. And we should take seriously the issue of providing a proper back-up in that regard. However, I emphasise that a large part of the problem concerns the availability of funds. That will not go away. The noble Lord, Lord Ezra, was right. The schools that are deteriorating now must eventually be put right as must the colleges. If we do not put them right now with a proper schedule of maintenance, we will incur enormously increased bills in the future.

As regards education, we are told—I accept that the Minister may not want to deal with this topic in his reply—that under the new education Bill, if it becomes law, some schools will opt out. The interesting question is: what will happen to the maintenance of the fabric there? Who will be responsible for that? Will schools which decide to opt out do so with proper funds to improve the physical condition of such buildings? The point could be made that prospective opting-out schools have not yet realised they will have to cope with such problems. I hate to introduce a slightly political point here, but it may well be that once they realise the existence of the problem they may decide that opting out is not exactly the most attractive proposition.

I have concentrated on education, and that comprises the bulk of what I want to say. However, I cannot resist drawing to the attention of the House something which perhaps many noble Lords have already seen in local newspapers. In today's press there appears a report on the state of our hospitals and the question of their maintanence. There again we see the same problem: buildings often old, but not always old, suffering from a maintenance backlog involving ever increasing sums of money to bring them back into proper operational condition.

I conclude by agreeing with the sentiments expressed by the noble Lords, Lord Dean of Beswick and Lord Ezra, that this is an example where good management is the sensible way to improve the situation. We can provide the right incentives to do so. It is perhaps an example of how we could spend a little money—not a vast amount—and get a very good return for that money. I commend the report and the suggestions put to the Minister which I hope will reach his colleagues in government.

3.55 p.m.

Baroness Fisher of Rednal

My Lords, I should also like to thank my noble friend Lord Dean of Beswick for giving us the opportunity to discuss this report. We are all well aware of his great knowledge on local government matters and also his very personal interest in the happenings in local government.

The report is one from the Audit Commission; it is not an auditors' report as such but I think it should be considered as though it were. I say that because if we are looking at the words, it is described as "A Management Overview". However, if we look at the dictionary definition of the word "overview", it means a general survey. Perhaps therefore if we are looking at an auditors' report produced by auditors, the general survey should, as other noble Lords have said, require not only action by local government but also by national government.

The commission keeps a neutral position on property management when it recommends neither the "keep all" or "sell all" attitudes. That is an opinion which I especially welcome and which I think that local authorities will also welcome. Local authorities like to feel that they determine their own objectives. I know that the latter becomes more and more difficult for local authorities with the extension of government intervention—what we call centralism—and also with the restraints on local government spending which are imposed by the Government. As other noble Lords have said, the financial restrictions which local government are up against are a formidable obstacle that all local authorities have to face, whether on property development or on any other service that they provide.

The report states: If there is no rationale for retention, the property concerned should be sold". I contend that in the urban areas and the large cities it would be a much wiser property management policy for the local authority to demolish and to use the site, whether it be a school or a police station for the purposes for which it needs it most at the time. We must recognise that in the large cities, in large urban areas, the majority of the land is completely built up. If local authorities must provide, as the noble Lord Lord Ezra, said, care in the community, and if we are to provide more facilities for the elderly to be rehoused, we must realise that many of the old schools which the noble Lord, Lord Peston, mentioned are in areas where the children have left.

Therefore it is perhaps important that we look at those sites for future local government use and not place them on the open market whereby they will be lost for ever. I say that it is important for local authorities not always to seek to make a quick buck by selling their holdings. It is of course something that private enterprise never does, but it is always advocated that local authorities should do so.

That which was once acknowledged as a consensus between local authorities and government is of course now a rarity; it is most unusual for us to have a consensus. However, I hope that the Secretary of State will show a greater degree of co-operation when appeals on land or property usage are made to him.

Only recently an appeal was lodged with him concerning a site that had been cleared. It was intended that the local authority should use it for light engineering factory units in an inner city area where one is accustomed to engineering and factory units. The local authority lost that appeal to the Secretary of State and now another food supermarket is to be put in its place. The whole area is covered with shops selling food and suchlike. But, nevertheless, we are to have yet another food supermarket. I should add that small shopkeepers selling confectionery and bread, and the local authority, raised great opposition to the proposal.

There is another example which I would ask the Secretary of State to consider more seriously. It concerns preservation orders that are plonked on buildings. We know that to do that one does not have to know anything about the inside of a property. Someone goes around, looks at the outside and says, "Oh, that is old, preserve it". We saw a case of that in the Sunday newspapers this week. A preservation order was put upon a house which was built only seven years ago. It had been built out of odd pieces. The man had gone around all the junk yards where they were selling old furniture and beams. Someone from the department went round and said, "Preservation order". A fortnight later the man wrote and said that the house was only five years old. We are asking for efficiency from local authorities; we sometimes wonder whether the Government see themselves as acting efficiently.

A preservation order was made on two schools which I know well and which were built in 1858. They were condemned a long time ago as unfit for children to be educated in. They had been closed for about 15 years. Unfortunately the vandals had not got around to that area and smashed them all up. Someone went round and said, "Ah, an architectural monument", or something like that. The local authority was told to preserve them and keep them in a good condition. It did not have enough money to maintain the schools that children were attending, never mind those which had been empty for 20 years. The local authority has done the maintenance. The buildings look very pretty. They are three-storey buildings. There are about 20 windows about 4 foot by 5 foot along the front. There is lovely corregated iron in each of the window spaces so that the vandals do not damage them. That is the only way the local authority can preserve the property. They have no money to do anything else. The buildings are a worse eyesore than they were before.

Demands on local authority services are changing dramatically. As the report points out, financial resources, both capital and revenue, are under much more pressure. Other noble Lords have spoken about the deteriorating condition of much local authority property. Local councillors see it every day. Their officers see it every day. That is not all, the ratepayers—the general public—see it every day. They ask why all the property is allowed to deteriorate. They say, "Isn't it a shame that all this is being spoilt". We must remind ourselves again—I think that I am the fourth Peer to mention this—that the report says that there is a maintenance bombshell which should not be underrated. All of us who have read the report have that printed across our foreheads, as one might say.

There is a further property management anxiety with which local authorities have to contend. We recognise that the large cities are in the front line of the battle against many social problems. They have problems of unemployment, bad housing, homelessness and of course the high level of reported crime. The report mentions vandalism, which is an important aspect of the matter when we are looking at property maintenance. It is a serious problem in some areas. As a local magistrate, the problem is brought to my attention. It is not just the graffiti and other painting and daubing that goes on. Some of this vandalism is serious crime; for example, the arson of school buildings. It is difficult to operate property development and maintenance in areas of high vandalism.

We talk about alternative uses. I love these gay brochures that everyone brings out for us. I always think that they are also reasonably priced. As the noble Lord, Lord Ezra, reminisced, perhaps noble Lords will be patient with me while I reminisce and say that there is nothing new. I looked at the pretty pictures in the book which show how something was converted into a library and how something else was converted into a library. There is nothing new about conversions. In 1966, when I was chairman of the housing committee in Birmingham there was the beginning of what we call the battered-wife problem. It was difficult for us to provide battered wives with a refuge from their husbands. I can vividly remember that we converted a redundant Victorian red-brick police station. We made it into a refuge for battered wives. It proved to be a successful refuge. There was some sleeping accommodation because in those days police officers had to sleep on the premises. That was a conversion which was carried out before we had audits and management surveys.

Perhaps I may reminisce further. There is a beautiful open space around Birmingham called the Lickey Hills. It is a public open space which was generously provided by the Cadbury family. Before the advent of the motor car it was used a great deal by day-trippers going from the centre of Birmingham on trams and buses. A large refreshment room was built there. In 1963 that large refreshment room was not being used to any great extent and it was transferred to the Association of Boys' Clubs, which used it as a weekend camping facility for boys from the city.

Noble Lords will be pleased to know that I am drawing to a close. I shall read from page 5 of the management over-view. Paragraph 8 states that changes can be achieved by local authorities but that there may have to be a major change in attitude. It states: To some extent, however, local authorities' progress is determined by the willingness of central government to create an environment which facilitates active property management. That environment has been uncertain and, in some respect, hostile to portfolio restructuring for some years". As the report says, property management by local authorities must take place in a different way from that of the private sector. The report gives good advice as well as reporting the good practice that is already observed.

I close by asking the Minister whether he will tell us when the consultation paper on possible changes to the capital control system announced by the Department of the Environment will be issued. May I also ask him whether we can expect, arising from the Audit Commission's report which we are discussing, any government consideration of further financial incentives being offered to local authorities?

4.10 p.m.

Lord Graham of Edmonton

My Lords, it is a real pleasure to speak in this debate, the opportunity for which has been very kindly presented through the initiatives of my noble friend Lord Dean of Beswick. I congratulate him not only on his choice of topic but also on the breadth of the manner in which he introduced a very serious subject. All the speeches which I have heard since that of my noble friend have added not, I hope, to the problems of the Minister but to the worth of the debate for the Minister and his colleagues when they consider what can best be done next.

Knowing the Minister, I am satisfied that he will be well aware not only of the problems but also of a number of solutions. I want him to accept that I understand his difficulty in moving from an appreciation of the problems and solutions to delivering the goods. I am sure that he has appreciated that no one is using this debate as a stick to beat either the Minister or the Government mercilessly on the matter. Nevertheless, it is a useful opportunity for Members—I was going to say all round the House but I had better amend that—on this side of the House to say to the Minister that there are a number of aspects on which he and his colleagues will be sovereign. They are not merely the provision of cash but urging changes in attitudes. I want to hear the Minister tell us not only that he appreciates the problems but that he has the germs of a strategy to deal with them.

I am well aware that the report is welcome, timely and reminds a number of people—and I am only one of those who have already spoken who have local government experience and who can appreciate it—that through no fault of theirs but by a change in style we are now moving in local government into a new era. It is an era when the adaptation and adoption of techniques and devices which have been used by industry and commerce for many years are seen to be appropriate to the good management of local authority assets.

I congratulate the Audit Commission on the fairness and fullness of its report. I shall be wanting to use some of the matters which it mentioned for the points which I want to make. For instance, I hope that the Minister will accept that many of the criticisms which can be levelled at local authorities and their inability or ineffectiveness in dealing with some of the problems in property are due not only to a lack of resources. They are in a state of panic and under pressure from the Government for financial imperatives, not just this year but over many past years.

The report talks on page 3, paragraph 7 in terms of the demographic changes shifting the balance of the make-up of the community from the need at one time for services for children and young people to those for retired people. There is a growing trend towards community rather than residential care for mentally handicapped people. That was a point which the noble Lord, Lord Ezra, used in illustrating the change. I think it is in order to point out to the Government that it is all very well saying to local authorities, "We want you now to take care in your community of the mentally disturbed people who previously might very well have resided in Friern Barnet Mental Hospital. We are now going to release them into the community. Good luck, we wish you well". They do not say, "In order to do that properly what you need is resources and assistance".

The Minister will be aware that what we get is the sad situation where a local authority like the London Borough of Enfield will be under stress to do all sorts of things. It finds that the solution is to put increasing numbers of people who need special care on the 17th floor of a tower block. Then instead of having adequate day centres they are wandering the streets and byways of the Edmonton market and other places.

I think the Minister would do me and the House a useful service if he could say, "Yes, we want to see changes. Yes, we want the release of redundant assets and a better use of community assets but we also realise that local authorities are the prime agents of the central government and certainly the prime source of assistance for many people in the community. We recognise that they have problems as well". Talking in terms of the problems of a local authority the report says on page 5: The deteriorating condition of much local authority property is causing concern. An analysis of the school building profile since the War suggests that there is a worse problem round the corner". Other colleagues have gone on to say that this is a time bomb. I want to hear the Minister say not only that he agrees with the report and that it is a time bomb but that he has some ideas about how to defuse the time bomb. They may very well be along the lines of consultation and discussion with the local authorities. I do not want the Minister to tell me that one of the ways to deal with a problem is to sell or get rid of some assets and to use the capital. The Minister will know that to get rid of an asset at a certain time because you have to is dangerous. First, it may not be the right time to get rid of it and, secondly, with the overall stategy it may not be the right thing to do.

I served on a committee in another place on the Local Government, Planning and Land Act 1980 which brought in the regime which was designed to get rid of the assets in new towns. We know that every year the commission and other people are given a target by the Treasury: "We want the assets which are owned by the community in land and buildings transferred into cash, £100 million this year", or "£150 million", whether or not it is the right time to sell it. I know the argument is that they are not under an absolute imperative but are under an imperative to get rid of assets for a certain amount of cash in order simply to relieve the Treasury of the need to assist.

I know what will happen, for instance, with the London Residuary Body and ILEA. Let me give your Lordships another illustration. In my area of Edmonton there is a magnificent playing field owned by ILEA. It is a community asset used by many organisations and authorities. I can well imagine that the powers-that-be, whoever they are when it is all resolved, will be under pressure to get cash for that.

Perhaps I may raise the issue of allotments and allotment land. Of course time moves on and the allotments which at one time were desperately needed and well-used are no longer necessary. Over a period of time fashion changes. But the answer is not simply to sell the land to the highest bidder, build houses and move on. The idea is to have a strategy. If you are going to be forced to sell the land for a social purpose, which is that there is no longer a need for allotments, that is one thing.

The Minister can tell us just how little pressure he is putting on local authorities to change their property portfolio for the sole purpose of reducing their call upon central government for grant aid etc. In my view, there is a growing need by local authorities to find means of raising capital from selling their assets. Those of us with a little experience in business know first of all that it is no good selling assets simply as a means of keeping off the evil day. One must have a strategy. I hope that the Minister can help the House in that respect and I shall certainly listen to him.

We are looking at some of the solutions, and my noble friend Lady Fisher of Rednal was spot on when she chose the global phrase "the environment imposed by central government on local authorities". That is what I have been talking about for the past five minutes. It is the mood, the atmosphere and the ambience in which local government is seen by central government to be their trusted ally in serving the needs of our people. The Minister might say that all is sweetness and light, that most local authorities are happy to be driven, as I believe they are far too often, into doing the kind of things which the report mentions.

I want to spend a little time on the report prepared in 1987 by Her Majesty's Inspectors on the state of schools, which is the prime burden of our debate today. It is very worrying. I shall not use any more pejorative a phrase than that it is very worrying and very depressing. Whether or not it is due to malicious intent or accident, there are children who are getting the worst opportunity to flower, to grow and to take advantage of their intellect by comparison with others simply because the state of the buildings in which they are being educated deserves attention.

I do not make a political point. If the Minister acknowledges that that is the position and has something helpful to say, I shall appreciate it. What we are told—not by a politician but by Her Majesty's Inspectors—is that many buildings are in an unsatisfactory state. That position has been reported for years and in one-fifth of all classes seen in schools the accommodation is judged to be having adverse effects on the quality of work, usually because of its unsuitability for specialist use or its poor condition. There is a backlog of repairs and maintenance and intervals in the redecoration programmes leave a great deal to be desired. There is widespread concern about the state of furniture, some of which has reached the end of its useful life but whose replacement is put off for another year. Painting is done less frequently outside and there is an attitude of waiting until something has to be done.

One of the most shocking and sad things is the state of the libraries of our authorities. Libraries are not school buildings but are part and parcel of a good environment for our children. Yet what the HMIs are saying is that the most severe weaknesses, which were often long-standing, were in library support. In most authorities there was an absence or shortage of qualified librarians. This is not germane to the topic that we are discussing, but it very much affects the quality of life which is enjoyed or suffered by the children. The Minister will be well aware of statistics of that kind.

What is most depressing is that the position is getting worse. For instance, the Minister's own inspectors or ministerial colleagues told him that, so far as the repair of schools is concerned, in 1984 57 per cent. of schools inspected were less than satisfactory, and that by 1986 that figure had grown to 62 per cent. As regards the state of furniture in schools, 41 per cent. were less than satisfactory in 1984 but two years later 48 per cent. were less than satisfactory. As regards maintenance, which is a theme started by the noble Lord, Lord Ezra, and my noble friend Lord Dean, at what stage are we begging for trouble if we do not maintain schools? In 1984, 65 per cent. were less than satisfactory, while in 1986 70 per cent. were less than satisfactory.

As regards capitation allowances, which in this context we understand relate to pupils in nursery schools, there was a disparity between schools in a range of £12 to £27. In other words, the amount of money available to be enjoyed, used or worked with varied between £12 and £27 in nursery schools. As regards pupils of 16 and over, the spread was from £34 to £58.

I appreciate that there is a limit on time and I have taken what I think is a fair and reasonable amount of time. I just say honestly to the Minister that those who are taking part in this debate genuinely want him to succeed—which I am sure is what he wishes—in solving some of the problems, and we all want to see an understanding by him and his colleagues of the enormous problems faced by local authorities. They need his assistance and we very much hope that he can be helpful to them.

4.26 p.m.

Lord McIntosh of Haringey

My Lords, I join heartily in the thanks which have been expressed by other noble Lords to my noble friend Lord Dean, and indeed thank all my noble friends, including the noble Lord, Lord Ezra, whom I should like to call my noble friend, who have taken part in the debate this afternoon. I too regret that it has not seemed possible for any noble Lord on the Government Back-Benches to put his name down to speak. Surely the department or Conservative Central Office could have issued a brief to encourage them. Even if there are not so many noble Lords on the Government Benches who are expert in local government, there are others who could mug up a brief.

I must at the outset declare not an interest but some of my murky past in local government so far as property is concerned. In the early 1960s, in the first days of the London Borough of Haringey, I was chairman of the development control sub-committee and my friend the chairman of the planning committee and I used to maintain in the borough planning office a map of the borough. At the very outset we marked on it clearly in red that part of the area of the borough which was under local authority control, and marked in rather less clear red—perhaps more stripey— that part which was under central government control or under the control of other public authorities.

We made it our business in the first two years of the borough to acquire everything we could lay our hands on, whether it was additional housing, whole housing estates, individual houses, factory premises which were surplus to requirements or light industry premises which were surplus to requirements. For example, we were able to fulfil an election pledge that no family should be separated by reason of homelessness—something which it would by very difficult for any local authority to achieve today.

We did so without the Conservative opposition ever realising that we were doing it without the benefit of any budget for capital expenditure. Indeed it took them two years before they woke up to the fact that we had an open-ended commitment to spending capital on acquiring property, and two years before they asked the officers to ensure that we had a proper capital budget—something which we had for ourselves but which we had not been particularly inclined to disclose to the opposition until they found it in their hearts to ask us.

I do not regret any of that. I think that both for the uses to which we put these properties at the time, and the advantage it has been to the borough since then, a policy of aggressive and effective portfolio management of property by a local authority is a good way for a council to be occupying its time and to be occupying ratepayers' money. I believe that they got a very good buy from the properties which we acquired at that time and which are still fulfilling useful social and economic purposes in the borough. Without them it would have been impossible to have anything like the housing programme that we had, much of which has resulted in contented owner-occupation, thanks to the Government's policies, and without them it would certainly have been impossible for the borough to have its very extensive and widely acclaimed policies of employment generation in the 1970s and the 1980s.

If that is a declaration of interest so be it. I join with my noble friend Lord Dean of Beswick in agreeing that this is a very important matter and something which deserved better attention from the Government Benches than it has received. It deserves more attention because the report which we are discussing today is a particularly good one. Indeed one comes to expect that of the Audit Commission, which has had a reputation in the four years since it started of being conspicuously impartial. When I say impartial I mean that it has embarrassed government and local authorities alike without fear or favour.

It is true that this is not the first report of its kind. The AMA 10 years ago published a report on the development of publicly-owned land which covered many of the same points that are to be found in the present report. As the noble Lord, Lord Ezra, said the NEDC has published a report on this matter and it is not one which has been wholly out of the public prints over the past 10 or 20 years.

But this report raises a number of specific issues which deserve attention and clear and helpful answers from the Government. The report refers to the problem of surplus, unused and underused land and property. It is true that a number of years ago when the Land Registry was less comprehensive than it is today a number of us thought that the very existence of a land registry would help us to identify unused or underused land and property and to do something about it. The report expresses the view, with which I agree, that that has not proved to be the case as the Land Registry has extended. I think that it is now up to the Government to find some way of bringing to the attention of all concerned where there is underused or unused property and by using the carrot and not the stick to encourage local authorities to make better use of such property.

The report refers to the commission's previous comments on the education issue. A number of my noble friends have made very cogent points about the decay in the maintenance of our educational property stock. Those are extremely valid points and they deserve close attention by the Government.

But the Government are not only not helping but are making things worse. The very proposals of opting out and the proposals for the decentralisation of control of property which were contained in the Education Act 1986 make it more difficult for an education authority to exercise effective control over its educational property portfolio. The same is true of the competitive tendering procedures. They may or may not result in the end in a better standard of maintenance per pound spent but they will certainly not create an atmosphere of certainty and security in which an education authority can plan the maintenance of its property. I shall not go into that argument, however.

The report refers to the problem of controls on the use of capital. We understand that a consultation paper is due from the Government about how that is to be implemented, and we understand that there are to be changes which are due to be implemented along with the poll tax in 1990 if that tax meets with the approval of your Lordships later this summer.

The House would welcome further news from the Minister on what prospects there are of a more defined policy on the Government's part. The noble Lord, Lord Ezra, and other of my noble friends referred to the use of capital receipts. It is no incentive whatsoever for a local authority to do some of the sensible things which are described in the report if every penny that it saves is then taken off its capital allocation. There is no incentive, whether it is the National Coal Board or a local authority which is being treated in this way. The Government will have to find some way of providing an incentive for local authorities to make changes in the effective use of their capital property assets.

It would not be right for me to continue without referring with approval to the fact that the report makes very strong recommendations not just for central government but for local authorities themselves and about the obligations on members and on officers to have a strategy of their own for the maintenance, control and utilisation of their property portfolio. In my view the report refers rightly to the need to have a committee whose chairman is of equal standing to the chairmen of other major committees and whose prime responsibility is the control of the property portfolio, and to have a proper officer backup to that committee to enable it to play its part in the operations of the council. I believe that the local authority associations have already endorsed those recommendations and I endorse them today.

But behind all this lies a fundamental issue of the relationship between central and local government. What the Government are saying, and certainly what the Audit Commission is saying, is that local authorities should adopt a businesslike attitude to the management of their property portfolio. That is a view with which I heartily concur. But at the same time the history of the intervention by central government in the affairs of local authorities over the past nine years has been one which virtually makes that impossible. Every way we turn we find that central government are interfering in more and more detail in the way in which local authorities plan their business, in the way in which their financial support from central government is provided and in the decisions they make about the disposal and use of their own property.

The noble Lord, Lord Ezra, referred to the lack of incentives for a more effective use of the capital from property disposals. The same is true of maintenance. The very detailed control of local authority revenue expenditure which is contained in the rate-capping system imposed by this Government, in the closer control of revenue expenditure and in the controls on contributions from central government which have been imposed by this Government have meant that local authorities are no longer able to exercise sound business estate management judgment on the control of their own properties. The result, as my noble friends have made clear, is that the physical condition of local authority properties, whether they be schools, libraries, public buildings or indeed roads, has been deteriorating over the life of this Government. That is a disgrace not only for local authorities but for central government who set the financial climate in which local government works.

When there is a similar decline in the quality of road surfaces on our trunk roads and our major roads in this country, the Automobile Association, the Royal Automobile Club, the Road Haulage Association and all the other strong pressure groups raise their very powerful voices in support of greater public expenditure on the maintenance of the roads. But when there is the same decline in the quality of the environment in our public housing, our schools, our libraries and our public buildings there is nothing like the same pressure, because the people who use those public buildings do not have the same political clout—certainly with this Government—as do the commercial interests and the road haulage interests. It is for that reason that there has been this significant decline, for which my noble friend Lord Graham of Edmonton gave chapter and verse, in the quality of the environment of local authority property.

The truth of the matter is that central government speak with two voices when they are talking to local government about these matters. On the one hand they say, "Be businesslike. Find better ways of saving money and we can justify the cuts that we have imposed on rate support grants and on other grants for local need". On the other hand the Government interfere and take things away. The Chancellor sees the opportunity for windfall profits, and every incentive that there is for local authorities to adopt the very sensible recommendations of the Audit Commission is weakened by the way in which central government act in practice. It is not a matter of winning the hearts and minds of central government. They speak the right words. What we want now is that they should perform the right actions.

4.40 p.m.

The Minister of State, Department of the Environment (The Earl of Caithness)

My Lords, I am grateful to the noble Lord, Lord Dean of Beswick, for raising this important debate today. Although we have been small in number, I believe that the debate has been high in quality and I am grateful to the three Members on the Opposition Front Bench for taking part. It gives me an opportunity on behalf of the Government to tell your Lordships that we wholeheartedly welcome the Audit Commission's report and are grateful to it for its work.

The scale of local authority property holdings is immense. The noble Lord, Lord Dean of Beswick, mentioned that there were 155,000 smallholdings and 100,000 urban parks. Perhaps it would be appropriate for me to point out that those figures are hectares.

The Audit Commission estimates that the replacement cost of local authority property—excluding housing—would be in excess of £100 billion. No one knows the true figure. That of course is part of the problem. Too many local authorities do not know what they own, let alone how much it is worth or why they own it. Without that information, opportunities for improved management and use of resources will be lost.

There is also a huge annual bill to meet running costs—energy, cleaning, maintenance, and so on. It is estimated at £4 billion. To put that figure in context, between 15 per cent. to 20 per cent. of expenditure on services such as education and libraries can be consumed by the running costs of property. I therefore agree with the noble Lords, Lord Dean of Beswick and Lord Ezra, about the importance of proper maintenance. I do not agree, however, that this is necessarily a matter of increasing public expenditure. The Government's plans for the current year, 1988–89, include provision of £6 billion for gross capital expenditure by local authorities in England and Wales. That represents an increase in real terms over the corresponding figures for the previous year. I know that the noble Lord, Lord Graham of Edmonton, will agree with me that that is a real sign of help.

The report sets out a detailed strategy for local authorities to follow. Now it is up to them to respond. I believe that most local authorities regard the report as helpful. Some were no doubt the models for the report's recommendations. Those authorities, I am sure, will have an important role to play in disseminating information about good practice to the majority of councils who will be eager to improve their own performance. Perhaps there will be a small number who will ignore the report. I hope that will not be so. Regrettably, we are aware of authorities where senior management is depleted and demoralised by the political posturing of members, and the chances of the Audit Commission's message being heard is slim.

The way the commission works in preparing special value-for-money reports is to set up a small team of experts drawn from the commission's own staff, the district audit service, local authorities and private consultancy. In parallel with the production of this published report, the team will have prepared an audit guide. Those two documents will be used by auditors in the next audit round as a basis for establishing local projects with individual authorities which aim to agree appropriate action in each area. Progress on implementing the recommendations of those local value-for-money projects is monitored closely by auditors in subsequent audit rounds. Some authorities may already have made a start in applying the lessons presented in the commission's report in less formal ways than through specific projects agreed in detail with their auditor.

The report recommends a number of specific measures, and it may be helpful to your Lordships if I describe them briefly. Councils are recommended to establish local authority property management committees. It is important that property is seen in an authority-wide context. The opportunities for rationalising and making better use of property will frequently be missed if authorities rely solely on single-service committees. The report also recommends that authorities should establish an appropriate management structure in support of the property committee. The right approach to these organisational issues will vary from one authority to another. The crucial points are that the information on such things as ownership, utilisation, value and running costs should be available to managers, and that their role in seeking to make the most effective use of the authority's property assets should be clearly defined.

The Audit Commission stressed the importance of councils compiling complete asset registers. That may seem a rather obvious point but I hope that it horrifies your Lordships as it horrifies me, particularly as a former practising surveyor, that many local authorities do not have a clear idea of what they own.

Lord McIntosh of Haringey

My Lords, is the noble Earl recommending that every local authority should have a red map?

The Earl of Caithness

My Lords, the use of the red map would be to dispose of the surplus properties, which is an item that I shall come to in a minute.

Other public bodies are no doubt in the same position. It is long overdue that they get their act together. The experience of the residuary bodies appointed to wind up the affairs of the GLC and the former metropolitan county councils is most instructive. The residuary bodies needed to know what property the abolished councils owned so that they could pass over the deeds of properties that vested in successors at abolition. They needed to assess all the properties they had inherited to establish whether they too should be transferred to successors, or whether they should be sold as surplus. This has been a huge task for all residuary bodies, but more for some than for others.

The noble Lord, Lord Peston, talked about maintenance schedules. I agree with him on that and on the need for them. However, first of all one must know what one owns. The West Yorkshire County Council was an example of an authority whose knowledge of its property holdings was negligible—and here I am being generous. On taking over in April 1986, the West Yorkshire Residuary Body found a vast quantity of property deeds sitting in the basement of County Hall, but no comprehensible record of what they contained. It has taken a team of seven to eight staff nearly two years to sort through the records. They have had to examine 25,000 sets of deeds in order to produce a computerised record of the former council's holdings.

Lord Dean of Beswick

My Lords, I regret having to ask the Minister to give way for a moment, but are we debating this report or a report on the residuary bodies? There are a lot of other things that I should like to say about the activities of the residuary bodies. They are supposed to be accountable to somebody, but nobody can find out who they are accountable to. Some of them are doing some very strange things which I could have introduced into the debate. However, I restricted myself to the report named on the Order Paper. I am sorry to say that the Minister does not appear to be doing that. This question of the residuary bodies is an extraneous matter.

The Earl of Caithness

My Lords, I am talking entirely within the context of the debate which the noble Lord, Lord Dean of Beswick, so ably introduced. I was talking about complete asset registers and giving an example of what happened when there was not one.

Baroness Fisher of Rednal

My Lords, the local authorities which the Minister mentioned are not there any more. The Government have decided that we should not have metropolitan counties. We were talking about local authorities. The Audit Commission is reporting on local authorities and not metropolitan counties.

The Earl of Caithness

My Lords, I am also talking about local authorities. I am giving an example of what happened following the abolition of a former body in April 1986 and the trouble that has been involved in sorting out and compiling a complete property register. I regard it as highly relevant to the debate.

While that work was indeed strenuous, perhaps one could liken it to a labour of Hercules because the residuary body has already made substantial progress in rationalising its property inheritance. I mention a labour of Hercules because if Augeas had been the chair of a Left-wing Labour municipality he would not even have known he owned the Augean stables. In the first two years of its life the West Yorkshire Residuary Body has sold surplus property worth £8.3 million for the benefit of West Yorkshire ratepayers.

I have no doubt that some other authorities' property records are as chaotic as West Yorkshire's were. Of course there are some costs involved in compiling a register, but once the work is done the continuing costs will be small. However, the potential benefits from being able to manage property effectively will far outweigh the costs of setting up proper systems. Any public body should be ashamed to confess that it does not know what it owns.

Service departments need to understand the costs attributable to the properties they manage. It is all too easy to assume that a certain level of cost is inevitable. Those responsible for property need to be alive to the opportunities for saving costs. It is particulary important to look for examples of properties sited in expensive areas which could just as efficiently be located elsewhere. Similarly, if properties are under-used it represents a waste of resources. The Audit Commission quoted examples of what can be done, and I should like to refer your Lordships to a small number of these. One council had a library housed in an old, inadequate prefab and a redundant school. The school was converted into a new library, and the surplus playing fields were sold for sheltered housing development. The old prefab was pulled down and replaced by a car park. This example was described in the report as part of a self-financing corporate property review.

Another council decided that it needed to rationalise its administrative offices, which were spread across its area, often in old and unsuitable buildings. A teachers' training centre on the edge of the town centre became surplus and was closed. The centre was adapted for offices and a new council chamber was added. Seven of the old administrative buildings were sold. In this way, two-thirds of the cost of converting the training centre was recouped.

One council found that its plant nursery was losing £40,000 a year and so it decided to close it. This entailed relocating a depot and temporary offices on the same site. The council also had to buy plants from a private supplier when required. The depot and staff were relocated to other sites and the site was sold, with planning permission, for £1.4 million. A significant aspect of that example is that the annual revenue equivalent of this capital receipt—that is £140,000—was credited against the leisure committee's revenue cuts target. Although, as I have said, it is important for property to be considered as a council-wide asset, it is also worth while to give individual committees incentives in appropriate cases to release assets for disposal.

The key to achieving effective property management is for local authorities to undertake regular reviews of their property holdings and to be continuously looking for opportunities for rationalisation.

Although the report is mainly for local authority action, as has been pointed out it included two recommendations directed at central government. One was raised in detail by the noble Lord, Lord Dean of Beswick, and concerns capital controls. The report noted that the Government intend to introduce a new capital controls system at the same time as the community charge. The commission recommended that the new system should include greater incentives to local authorities to realise surplus assets. It inferred that the rules limiting the rate at which capital receipts can be spent on new capital expenditure were too tight, and was critical of reductions in the prescribed proportion of receipts that authorities can spend in any year, which, it said, created uncertainty for local government. The Government have recognised the faults of the present capital control system for some time, but I do not accept that a disincentive effect on sales is one of them. On the contrary, there has been a steadily rising trend of surplus property sales over the past few years and the Government are keen to see this continued.

I can tell the House that, in formulating our proposals for a new control system, which we hope to issue soon, we shall want to ensure that a proper incentive to dispose of surplus assets is maintained. But we shall also want to ensure that the distribution of spending power between authorities adequately reflects need and is not dominated by the distribution of capital receipts.

The noble Lord, Lord McIntosh of Haringey, mentioned that the report also referred to the land register system and recommended that central government should place more emphasis on "carrots" rather than "sticks". My right honourable friend the Secretary of State has already announced that he intends that local authorities should publish information about the unused and underused land that they own. Those who adopt the Audit Commission's recommendations will have no difficulty with that. In the end, I hope it will be possible for local authorities to publish information about all their land and property assets.

I have already referred to the West Yorkshire Residuary Body and to the value of property that they have sold. The experience of other residuary bodies as regards surplus property has been similar. In the first two years of their existence, residuary bodies have been able to realise £250 million from property sales. These sales directly benefit the ratepayers of the abolished councils' areas. But more than that, surplus land is being brought back into productive use. This remarkable achievement relates to the surplus holdings—perhaps I should say hoardings—of only seven councils. I wonder what could be achieved if all councils adopted the energetic and determined approach to property that has been shown by the residuary bodies.

The noble Lord, Lord Ezra, mentioned the need for local authorities to undertake energy saving projects, and of course I agree with him. It is for local authorities, using the freedom available to them in determining their priorities, to find room for such projects within the considerable resources available to them for capital expenditure. Of course they could find room for more projects by managing their property more efficiently, as the Audit Commission report recommends.

The noble Lord, Lord Peston, said that successive governments had looked to capital expenditure cuts as the easy short-term solution to spending problems. That has indeed been the case, but I remind noble Lords that in the public expenditure White Paper published in January, this Government have made an extra provision of £1.5 billion for public capital spending in 1988–89 and 1989–90.

The noble Baroness, Lady Fisher of Rednal, had great fun expressing what I thought was a slightly cavalier attitude to our heritage. She alleged that a preservation order had been made by the department on a cottage that was built five years ago. The truth is that we accepted a recommendation from our advisers—the Historic Buildings and Monuments Commission—to list the cottage, not to preserve it. It was included in a list of a number of properties that we received as part of a re-survey of that particular area.

Unlike the noble Lord, Lord McIntosh of Haringey, I am firmly of the opinion that local authorities own too much property and that a great deal of it should be sold. That, of course, is not the only message in the Audit Commission's report. The report is a wide-ranging and authoritative account of what can be done to improve local authorities' performance in this area. It deserves full-hearted commitment from members and officers alike to secure the implementation of its recommendations. As the report says: Few authorities have got it right. But those which have can point to real and demonstrable benefits, not only in terms of valuable capital receipts and reduced running costs, but also in the improved quality of services they deliver. My Lords, I commend this report to the House.

4.57 p.m.

Lord Dean of Beswick

My Lords, when I opened this debate I explained that I had brought this subject before your Lordships' house in order to bring this issue before the nation as a whole. The exercise has been very worth while.

I should like to express my appreciation to the members who have spoken from both the Front and Back Benches on this side of the House, but sadly I cannot congratulate anybody other than the Minister from the other side. I say that with some regret because normally I would be in full sympathy with the Minister's attempts to answer the debate. However, I think that he spent far too much time talking about the role of the residuary bodies, which is a completely separate subject, and ignored points that were raised in the debate.

He made special reference to West Yorkshire and properties that the residuary body had sold off, observing how much benefit there had been to the ratepayers of that area. I happen to be a ratepayer of West Yorkshire. I am not yet aware that this process has been of any benefit to me, because I do not know where the money has gone.

If one must talk about residuary bodies, I believe that they are a weapon forged by the Government to take the place of democratic councils which have been disbanded. If the Government are so convinced that they are right, perhaps they will make some time available for us to debate the role of the residuary bodies. I have in mind the situation in Manchester and what will happen to the ratepayers in that city in respect of one particular project. The chairman of the residuary body was appointed by the previous Secretary of State for the Environment, Mr. Baker, to safeguard the interests of the ratepayers, who look like being faced with a substantial deficit which they will have to meet. Money will have to come from the ratepayers of Manchester and the other 10 districts in order to buttress up something which they inherited but did not want.

There are two sides of the story to be told. As the Minister has brought up the subject of the residuary bodies, I shall take the first opportunity to use the facilities that are available to noble Lords in this House to debate what the residuary bodies have been doing and where the money has gone.

I am sorry that he was not able to find time to reply to the part of my speech which is of deep concern to everybody. It is the diminishing building force that we have in this country. I am not a critic of the Government's training schemes, but, even allowing for those, we are facing a situation where a large project will have to be undertaken with a substantially and continually reduced skilled labour force. Perhaps the Minister would like to consider that matter and discuss it on a future occasion.

I thank everyone who has taken part in the debate. I give my special thanks to Mr. Howard Davies and the Audit Commission for producing this report. It has not been widely publicised but it is certainly very important when one is talking about our infrastructure as a nation. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.