Tuesday, 21 July 2020
Ceisteanna Eile - Other Questions
16. To ask the Minister for Public Expenditure and Reform the research undertaken on foot of the Spending Review 2018, Analysis of OPW Spending on State Rents, in particular on the balance between capital and current expenditure; the effectiveness of the current model in meeting accommodation requests; if value for money is being obtained; and if he will make a statement on the matter. [16768/20]
My question concerns the Office of Public Works and the spending review carried out in 2018, Analysis of OPW Spending on State Rents. It is a matter in which I have a particular interest. What further analysis and research has been carried out on the conclusions and recommendations of the report?
I know this is an area in which the Deputy has much interest and has raised in both the House and the Committee of Public Accounts. The State’s office accommodation portfolio is large and geographically dispersed. It currently comprises 543 buildings of various sizes totalling an estimated 888,000 sq. m of accommodation of which 61%, 542,000 sq. m is in owned buildings with the balance of 39%, 346,000 sq. m leased. Up to 52% of office accommodation is in Dublin with 48% spread throughout the rest of the country.
In managing the portfolio, the OPW actively seeks best value for money in response to requests for accommodation from Departments and State agencies. Decisions taken on whether to lease, build or purchase accommodation have regard to several factors in order the optimum property solution can be achieved in each case. The main factors are the operational requirements of client Departments and agencies, availability of capital for investment, property market trends, availability of sites for development and the timescale within which a solution has to be delivered.
Arising from the 2018 spending review paper on OPW spending on State rents, a follow-on expenditure review is being undertaken by the OPW and the Department of Public Expenditure and Reform. It is focussing on the balance between capital and current expenditure within the OPW’s estate management function. The review involves research into the current models for providing office accommodation and their long-term costs.
I envisage that the review, when completed, will make a valuable contribution to policy in this area and will provide an enhanced evidence base for managing the State office accommodation portfolio into the future. I expect the review will be completed over the coming months and will be published later this year.
I would appreciate it if the Minister of State could give a more precise date of publication because this review was carried out in 2018, over two years ago. It was very specific. I have the utmost respect for the OPW which does a tremendous job. It has a portfolio of over 2,000 buildings, divided between Garda stations, heritage sites, offices for rent and storage spaces.
There is always room for improvement, however. Some of the weaknesses highlighted were from its own internal review at the time. One was the lack of data on the numbers of buildings and so on it had. That was also identified in the spending review. With the absence of data, no decisions can be made properly on policy. Everything was identified in that review for which we paid money.
I know all of the criteria depend on the Department's numbers such as building type, occupation density, the average rent and cost per square metre. What precise action was taken on the various recommendations from the spending review? The Minister of State gave me one but no date for the publication.
I have given the Deputy no date. However, I will prioritise this during my tenure in the Department. I have only entered the Department in the past ten days. From my previous time on the Committee of Public Accounts, I know this issue constantly arose, particular concerning the balance between rent and purchase or build.
It is worth noting that on rent alone, the OPW rental bill has dropped considerably. Annual rental costs in 2019 were approximately €97 million for 350,000 sq. m. In 2010, rental costs stood at €128 million. We are making progress.
On the Deputy's point about the determination as to whether we want a model of more rental or more construction, the report made specific references to the benefits of both, particularly when Departments and agencies may have short-term needs which we might not be able to fulfil over a short period. It is worth noting that the OPW has several projects in office accommodation in Dublin city that are well advanced. We are trying to ensure they are brought to fruition as quickly as possible to reduce the overall requirement for rental properties. It should ensure that we will be able to deliver the best possible office accommodation in the shortest period.
If there are specific points the Deputy wants me to come back on, I can do so in writing.
I know the Minister of State is new to the job and I do not mean to put him in a spot. However, the purpose of these reports is to ensure continuity, regardless of who is in government or how long they are in power.
The spending review in question was undertaken specifically to look at the OPW and its whole portfolio of rented properties. I am personally in favour of acquiring or constructing buildings. It makes no sense that we are paying out nearly €100 million per year in rents. The Government and the OPW should be right there i lár an aonaigh, in the middle of the market, acquiring properties.
When weaknesses were identified, as were reported to the Comptroller and Auditor General in 2019, and this spending area was done, we must be seen to take action and justify this high level of rental costs as opposed to owning the buildings.
I do not disagree with the Deputy. As I stated earlier in my reply, the decisions on whether we lease or build must have regard to several different factors. I referred to two of them, namely the operational requirements of the Departments and agencies. Many of them will come to the table with different and peculiar demands in a short period which we might not be able to fulfil.
Availability of capital over a short period is another factor. When one stacks up the business case, one must decide whether it is proportionate to go one route or another.
I do not disagree with the Deputy that it is more desirable for the Government to own most of the properties on which it depends. It is worth referring to the statistics on the percentage of offices owned versus those rented, as well as those offices in Dublin versus outside of Dublin. I would have thought the figure for offices in Dublin would have been much higher when it is actually 50:50. This is a point we can address from a regional point of view.
The cost benefit of rent versus ownership is a matter that the Department will be coming back to when the current report is finished. When that review is completed, I have no difficulty in sitting down with the Deputy or the new Oireachtas finance committee to go through what is the best course of action to take for our stock of accommodation to meet the demands of our civil and public services.