MEL(2000)29

4. The Report has contributed to the consideration of a number of issues including some touching on the disposal of surplus property. These are detailed in the Annex to this letter along with the measures which have been agreed following consultation with colleagues and which have been endorsed by the Capital Working Group led by Barry Sealey and Robert Calderwood.

Other Matters

5. Following the triennial review and consultation with the Service the new edition of the Department's NHS in Scotland Property Transactions Handbook is now being printed. Copies will be sent to Holding Bodies next month.

Action

6. The Scottish Health Plan set our change agenda. The measures and actions set out here are intended to support Holding Bodies in delivering planned improvements in their essential infrastructure. Property is an essential part of the infrastructure needed to support the delivery of high quality health and social care in appropriate locations. It impacts, directly, and indirectly, on the quality of that care both through its functional suitability and by contributing through its physical form a sense of respect, wellbeing and understanding of the needs of patients, staff, visitors and the wider community. Regardless of ownership the NHS in Scotland and its partners in care provision must work to ensure that care facilities are maintained to a high standard in keeping with and supportive of the care provided. This must include steps to ensure that essential buildings are in the best physical condition, clean, welcoming and providing a pleasant internal and external environment.

7. Colleagues are now asked to take all necessary steps to incorporate the promulgated changes into their working practices.

J S ALDRIDGE
Director of Finance

Annex A

SEHD: NHS IN SCOTLAND PROPERTY PERFORMANCE REVIEW, APRIL 2000
ALL-SCOTLAND REPORT

1. It will be seen from the Report and last year's "Ownership and Occupation of Property" report that the NHS in Scotland continues to realign its property holdings (land and buildings) to reflect changes in service need and the means of provision. Land holdings have been reduced by over a quarter in the last 10 years, from around 4,000 to under 3,000 hectares. The sale of this land and associated building has generated receipts of some £260m for reinvestment in patient care. Notwithstanding this reduction the amount identified as non-essential has increased rather than diminished. This reflects the ongoing re-appraisal of need in the light of service change. Some 50% of total land holdings are currently identified as non-essential, ie either non-operational now, or expected to become so within the 5 years to 31/3/05.

2. The expectation that over 1,000 hectares will be sold within the next 3 years is seen as very optimistic. This view is supported by the fact that last year's census anticipated the sale of over 1,000 hectares in the 3 years from April 1999 to April 2002; the fact that total land holdings have fallen by only 43 hectares in the last year, albeit that the disposal figure will be somewhat larger, being offset by acquisitions; and the fact that total land holdings have fallen from 3,121 in 1997 to 2,921 in 2000, ie by only 200 hectares over the last 3 years, again without allowing for the offset of acquisitions. The fact that 437 hectares of the non-essential have been non-operational for more than 3 years is also noteworthy.

3. It is clear therefore that not-withstanding the real progress made, more needs to be done to speed up the disposal of non-essential and non-operational property in order to assist the delivery of Holding Bodies' aspirations; to reduce resources deployed in maintaining assets that do not support patient care; and to bring forward new receipts for re-investment in care. To that end the Department following consultation with the Service have agreed a range of new measures which are intended to support the ongoing efforts of Holding Bodies in this area. The measures which are endorsed by the Capital Working Group in its Interim Report are outlined in the Appendix. These measures do not deal with all of the matters impacting upon the issue. In particular the translation of non-essential to non-operational and surplus must be strongly influenced by local agreements about the re-provision and re-location of services; the formal closure process; and the approval of Business Cases, whether public or private financed. A review is ongoing of both the existing closure process and of the Scottish Capital Investment Manual. The latter will be influenced by the recommendations of the Capital Working Group.

4. In so far as the wider property performance is concerned, it is noteworthy that notwithstanding the major demands, financial and others, on NHS Trusts and other Holding Bodies the overall performance of the essential building area is now better than 3 years ago. There have been real improvements in space appropriately utilised (83% compared with 75%) and compliance with statutory standards (78% compared with 71%). Functional suitability is unchanged. The only reduction is in best physical condition (76% compared with 82%), ie that which can be described as new or sound, operationally safe and exhibiting only minor deterioration. This is seen as a reflection of the need to prioritise investment and the higher priority given to other needs, particularly compliance with statutory standards. The area not in best physical condition is likely to be that where major repair or replacement to an element or elements of the building is considered to be needed within the next 1 to 3 years.

5. As will be seen from the Report, Holding Bodies have plans which if confirmed will improve performance in all areas, for example bringing best physical condition of essential building area up to 95% by 2004-2005. The Department in considering the Capital Working Group's recommendations will wish to further support these plans to enable Health Boards, Trusts and other Holding Bodies to prioritise more investment systematically for equipment replacement, minor capital projects and the continuing refurbishment and upgrading of essential existing property.

6. Such actions cannot be seen in isolation and will be assisted by the efforts of Holding Bodies to dispose of surplus property on the one hand and to make maximum use of PPP/PFI on the other when taking forward new projects.

Appendix to Annex A

A RANGE OF NEW MEASURES AIMED AT THE EFFECTIVE DISPOSAL OF SURPLUS PROPERTY

1. That the NHS in Scotland join the planned Scottish Executive "Property Portal" aimed at using the internet to market surplus public sector property in Scotland.

Note: This has been initiated by the Scottish Executive DAS Land and Property Division and is being actively developed. Properties would be advertised in a 2-stage process: the first being restricted to other public sector bodies, the second an open advert. The NHS in Scotland property would be entered after any formal closure process had been completed, and after checks had been carried out to ensure that there was no wider NHS in Scotland interest in the property. Further information will be provided in due course.

2. That the Department include the translation of non-essential to non-operational as a topic in discussions with Trusts and others around service planning and finance performance.

3. That the Department require Holding Bodies to include their plans for translating non-essential to non-operational in any Business Case submission and that the Department consider these as an integral part of the Business Case assessment.

Note: This will be incorporated into the new SCIM.

4. That the Department rigorously monitor the requirement in MEL(1999)44, that a Holding Body's Property Strategy must identify non-essential property and set targets for its translation to surplus and subsequent disposal.

Note: This measure is already being acted upon.

5. That the Department introduce a formal requirement that a property must be declared surplus if it is already non-essential and non-operational, or if it is non-essential, still operational, but that the plans that will enable it to become non-operational are agreed, being implemented, with non-operational status expected within 18 months.

Note: This eliminates local discretion in the timing of the declaration of property as surplus and provides a clear starting point for the measurement of progress. It would not pre-empt the formal closure process, ie plans to enable it to become non-operational must be agreed. Designation as surplus would not define the disposal strategy which would still be able to take account of all relevant factors including local market conditions or clarifying a property's planning status which may require either a longish disposal term or a joint venture approach. These could be offered as reasonable explanations why some cases were taking longer than the 3 year guideline to sell. This change will be included in the new edition of the Property Transactions Handbook (see paragraph 10) of this letter.

6. That the Department further encourage timeous establishment of the planning potential of surplus property by Holding Bodies, ie well in advance of it being marketed.

Note: The intention here is that a Holding Body establish dialogue with the appropriate planning authority at an early date regarding acceptable uses. It is not about a formal application for planning consent.

7. That the Department advise Holding Bodies to review Structure and Local Plan provisions to ensure that every opportunity is taken to comment when these are being updated.

Note: Although the Health Service in common with may other public bodies is not a statutory consultee, planning authorities are keen to involve health service bodies in relevant discussions, not least because of the extent of NHS in Scotland property holdings. This change will be included in the new edition of the Property Transaction Handbook (see paragraph of 10 of this letter).

8. That the Department through the Scottish Executive DAS Land and Property Division advise Holding Bodies of the review dates for Structure and Local Plans.

9. That Holding Bodies inform their local planning authority of property likely to become surplus within the Local Plan period, ie once identified as non-essential, in order that such sites can be designated as development opportunity sites.

10. That the current advisory role of DAS Land and Property Division be strengthened by adding a recommendation that it be consulted by Holding Bodies on their disposal plans.

Note: DAS Land and Property Division currently provide professional advice to the Department. The Property Transactions Handbook also draws Holding Bodies' attention to the Division's expertise, but in a low key way. The new edition of the Handbook (see paragraph 10 of this letter) will reflect this measure. Also in future in monitoring the requirements that a Holding Body's Property Strategy must include targets for the translation of non-essential to surplus and its subsequent disposal, the Department will seek the Division's comments thereon.

11. That the Department require Holding Bodies to provide an estimate of receipts from disposals as part of their 5 year capital plans.

Note: This action has already been taken in the context of the request for proposals for the 5 year capital plan for the period 2001-2006.

12. That the Department introduce revised rules for the retention of receipts, namely:

Allow 25% of each receipt to be retained by the Holding Body, up to a maximum in any one year of the equivalent of the bodies formula allocation or £1m whichever is the larger, for spend at local discretion, subject to it being on capital investment as set out in the agreed Property Strategy.
Allow the balance of Trust/Health Board generated receipts to be retained within a Health Board area in support of agreed capital investment plans where these form part of an agreed Property Strategy which are consistent with the HIP. Health Board to decide on relative priorities amongst its Trusts, as set out in 5 year capital plan proposals.
Where receipts cannot be used sensibly in year, introduce "credit" to be drawn down when needed in future.

This recommendation will be considered further by the Department, and information about the extent and details of implementation will be provided in due course.