The Management of Surplus Land and Property in the Health Estate

A report published today by John Dowdall CB, the Comptroller and Auditor General for Northern Ireland, concluded that the Department of Health, Social Services and Public Safety and Health and Social Services Trusts need to take action to strengthen the management of the health estate in order to address over-capacity. While the tasks of identifying and selling surplus land and buildings are challenging and work is already underway in a number of key areas, the report points to ways in which the Department and Trusts could do more in their continuing work to get best value from the estate. In particular, the report highlights (paragraph 9):

• the need to complete the development of an integrated and forward looking strategy for the disposal of surplus property which refines and reconciles local strategies into a regional overview;
• the need to strengthen accountability for meeting the Department’s objectives for the disposal of surplus property; and
• the need to explore ways of reducing the cost and time taken to dispose of surplus property while achieving the best price from the sale.

Currently the health estate is estimated to comprise around 400 sites with an estimated market value of around £800 million and a total replacement cost in excess of £2 billion (paragraph 2). Together, Trusts own about 60 per cent by value of all land and buildings held by health service bodies. The Health Estates Agency manages the remainder for the Department. Since their formation in 1993, the Trusts have realised around £12 million from property sales, while the Health Estates Agency has raised over £22 million (paragraph 2.11).

Main Findings

On Matching the Estate to Operational Needs

Some Trusts have not produced estate control plans, leaving them ill equipped to identify surplus property (paragraph 1.7). The report notes the establishment of a working group to review Trust estate control plans and calls on the Department to ensure that: these plans are completed at the earliest opportunity; they are used to agree rationalisation targets with the Trusts; and that these targets are based on reliable management information about property holdings (paragraphs 1.9, 1.13, 1.14 and 1.20).

The Department said that before the announcement on Developing Better Services in February 2003, uncertainty about the future pattern of hospital services had left it and Trusts reluctant to make pre-emptive declarations of surplus property. The report welcomes the drafting of a new Capital Investment Strategy for consultation in June 2004 as a positive development which should further assist in the development of disposal strategies (paragraph 1.12).

On Managing the Disposal of Surplus Property

There is scope for improving the guidance produced by the Valuation and Lands Agency on the need to comply with its requirement that the transfer of surplus property from one public sector body to another should not unduly delay disposal. In the case of Banbridge Hospital, the report shows that a delay in the transfer of property from the Trust to a local council not only held up the realisation of sale receipts but also resulted in the Trust spending £77,000 on security and maintenance (paragraphs 2.3 to 2.5).

The report examined a range of properties sold over the last few years where sale prices had exceeded initial pre-sale valuations or auction prices. For example, a property at Myrtlefield Park in Belfast was valued at £444,000 but was sold for £725,000 - a 65 per cent variation. There are other examples at Figure 2/paragraph 2.13. The effective marketing of these properties provides clear evidence that value for money was achieved in their disposals. As the principal reason for a pre-sale guide price is to help ensure probity and accountability, the report considers that the Department should strengthen the practice to take account of movements in price levels since initial valuations were provided. Regular review of valuations should address the difficulties encountered with lapses of time and allow further information to be factored into a valuation as time passes (paragraphs 2.13 to 2.17)

The report considers that control over the costs of selling surplus property and the time taken to dispose of it would be improved if the Department established a routine system of monitoring cost variations and cost patterns using information available from its own financial statements and those of the Trusts (paragraph 2.20).

The Department allows Trusts to retain some or all of the proceeds from the sale of surplus property as an incentive to identify and dispose of surpluses (paragraph 2.25). For example, Down Lisburn Trust retained nearly £3million out of proceeds of just over £4million when Kilwarlin House was sold (paragraph 2.26). However, the report considers that doing this will not of itself necessarily ensure that Trusts optimise the disposal of property. Instead it sees strategic planning as providing a firmer basis on which to base investment and disposal decisions so that receipts are used to best effect for the health service as a whole (paragraph 2.32).

Trust property sales have been concentrated in two Trusts - Down Lisburn and South and East Belfast, where high property values have provided an incentive not available to every Trust, for example, North and West Belfast Trust, which covers an area of high social deprivation and has difficulty with derelict, unmarketable properties (paragraphs 2.29 and 2.30).

On the Disposal of Individual Properties

The report records that 143.5 acres at Knockbracken Estate was first identified by the South and East Belfast Trust as surplus over eight years ago. Protracted consideration over alternative uses for the entire site has culminated currently in a proposal to the Department for Regional Development for its inclusion in the Belfast Metropolitan Area Plan as a Strategic Employment Location. Had it been possible for the Department to expedite the sale earlier, any receipts realised could already have been allocated for priority use elsewhere within the health and social services (paragraphs 3.3 to 3.5).

The report recognises that, in the interests of achieving an optimum outcome in such cases, delay can be unavoidable. However, it stresses the importance of there being a clear recognition of the costs, in terms of potential opportunities for early realisation of sales receipts, which delay imposes on the health service and calls on the Valuation and Lands Agency to strengthen its guidance on this issue (paragraphs 3.6 and 3.10).

A number of instances where Trusts have taken positive steps to maximise the use and potential of surplus properties were identified, for example, the Great Hall, Downshire Hospital, Downpatrick (paragraph 3.11).