The Wider Markets Initiative: Report by The Comptroller and Auditor General

The Wider Markets Initiative
REPORT BY THE COMPTROLLER AND AUDITOR GENERAL | HC 799 Session 2005-2006 | 27 January 2006
The National Audit Office scrutinises
public spending on behalf of
Parliament. The Comptroller and
Auditor General, Sir John Bourn, is
an Officer of the House of Commons.
He is the head of the National Audit
Office, which employs some 800 staff.
He, and the National Audit Office, are
totally independent of Government.
He certifies the accounts of all
Government departments and a wide
range of other public sector bodies;
and he has statutory authority to report
to Parliament on the economy,
efficiency and effectiveness with
which departments and other bodies
have used their resources. Our work
saves the taxpayer millions of pounds
every year. At least 8 for every
1 spent running the Office.
The Wider Markets Initiative
Ordered by the
LONDON: The Stationery Office House of Commons
9.25 to be printed on 23 January 2006
REPORT BY THE COMPTROLLER AND AUDITOR GENERAL | HC 799 Session 2005-2006 | 27 January 2006
contents
Executive summary 1
Part 1
This report has been prepared under Wider markets activity uses 6
Section 6 of the National Audit Act 1983
core assets more intensively
for presentation to the House of Commons
in accordance with Section 9 of the Act. The Treasury seeks improved value 7
for money from public assets
John Bourn
Part 2
Comptroller and Auditor General
National Audit Office Where undertaken, Wider Markets 12
20 January 2006 activity has generally delivered benefits
Improving the utilisation of assets has 13
The National Audit Office not generally been a priority
study team consisted of:
Mark Halliday, Richard Wade,
Barry Standen, Patrick Ogun-Muyiwa and
Simon Johnson, under the direction
of Patricia Leahy.
This report can be found on the National

Audit Office web site at www.nao.org.uk
For further information about the

National Audit Office please contact:
National Audit Office
Press Office
157-197 Buckingham Palace Road
Victoria
London
SW1W 9SP
Tel: 020 7798 7400
Email: [email protected]
National Audit Office 2006
Part 3 Appendices
There is scope for the initiative 22 1 Methodology 32
to have greater impact
2 Departmental Assets 35
There have been other over-riding 23
management priorities 3 Partnerships UK 37
The public sector can do more 24 4 Resource Accounting 38

to recognise and exploit opportunities
5 Publicly Owned Business Framework 39
The lack of an obligation to assess 24
opportunities has left some assets underutilised
Re-energising the Wider Markets Initiative 24

requires leadership and commitment,
at all levels, to a businesslike approach
Photographs courtesy of the Ministry of Defence, British Waterways, CEFAS and alamy.com
executive summary
executive summary
executive summary
1 Public assets such as land, buildings, people 4 The central monitoring and support arrangements
and intellectual property, which are needed to deliver are not substantial. As at late 2005 there was one Treasury
core services, can often be used more fully. The Wider official with policy responsibility for the initiative. The
Markets Initiative is a government policy designed to Wider Markets Unit in Partnerships UK also has one
encourage the more intensive use of such assets through dedicated full time person to provide, free of charge to
the development of new, non statutory goods and services public bodies:
which are sold on a commercial basis. The more efficient
n a help desk to respond to general queries;
use of public assets that results helps the public sector to
reduce its cost base and improve its skills base. n project specific support;
n a service to review wider markets projects and assist
in their development; and
The nature of the initiative
n guidance material.
2 The Treasury established the Wider Markets Initiative
in 1998 and contracted Partnerships UK to support it in 5 The 2004 Lyons review of public sector asset
1999.1 The policy is discretionary there are no income management3 recommended that efficient management
generation or other targets (paragraph 1.2).2 This is to of retained assets should be explicitly prioritised and
avoid any adverse impact on core activity and so that should include the more intensive sweating of physical or
decisions on commercial, income generating activities are intellectual property assets. The review noted difficulties
not distorted. in identifying intangible assets and recommended that
steps should be taken to re-energise activity to identify and
3 There is a central requirement for departments to exploit these assets.
have a Wider Markets Officer to provide guidance, to act
as a point of contact and to track activity. There is also an
incentive for the public sector to carry out wider markets
activity as departments can retain income generated to
offset against expenditure or to count towards efficiency
targets (paragraph 1.3). There are, however, cultural,
bureaucratic and resource barriers which run counter to
this incentive.
1 Partnerships UK launched in 1999 out of HM Treasury Task Force and funded in 2000 and 2001, is a joint venture, with a majority stake held by the private
sector. The cost of support to the Wider Markets Initiative is included with other services funded by the public sector. Further details are given in Appendix 3:
Partnerships UK and Figure 17.
2 HM Treasury Press Notice 176/98 dated 26 October 1998.
3 Towards Better Management of Public Sector Assets, A Report to the Chancellor of the Exchequer by Sir Michael Lyons, December 2004.
the Wider Markets initiative

executive summary
Scope of the report 9 Interviews with Finance Directors showed that,

given the demands of meeting ambitious headcount and
6 We examined the implementation of the Wider asset disposal targets, management of retained assets was
Markets Initiative. Improvements could be made by generally low down their list of priorities and excluded
considering the Initiative as an integral part of asset wider markets activity. A major driver for this activity was
management. Asset management itself would need to be budgetary pressures and a desire to generate extra revenue
treated as an important function. It would also require to spend on core activities. The one department in four
better information, including a systematic assessment that had actively promoted wider market activity had
of potential and, where significant sums are involved, been as much driven by funding pressures as being
reliable information on profit generated. aware of opportunities.
10 Following the Lyons review of public sector asset

Achievements to date management, the 2005 Budget required all departments
7 Some parts of the public sector were trading to develop an asset management strategy, driven by their
commercially before the Wider Markets Initiative business plans, as the responsibility of finance directors,
was established. To date, especially in the context of to be considered and approved at board level. Interviews
departments overall expenditure, the revenue generated with Finance Directors took place shortly afterwards
by wider markets projects launched since the start of the in May and June. They agreed that the Wider Markets
initiative is small.4 As many of the businesses are in their Initiative deserved more attention than hitherto. They
infancy they do not yet provide an accurate guide to the also considered that the public sector would gain from
potential offered by the Wider Markets Initiative. Our developing a more enterprising and businesslike approach
examination indicates that there is likely to be to asset utilisation and knowledge management.
untapped potential.
11 While at central government or even departmental
8 While public bodies are able to produce level the Wider Markets Initiative is currently having a
information on the revenue earned, most, apart from small impact, at a local level the position is different.
trading funds, have information gaps about the cost of The local level is where most wider markets revenue
generating income. For example, during the course of our is applied and where even a few thousand pounds
examination we could not find reconciled management can make a significant morale boosting difference by
information on wider markets activity, combining allowing deferred spending to take place. Several public
revenue, cost and performance information. It would bodies reported that staff job satisfaction increased with
not have been possible for us to construct an analysis of the additional skills and responsibilities required when
all wider markets projects, because of lack of data. To undertaking wider markets activity. Others report that staff
illustrate the possibilities, however, we did construct a used in wider markets activity brought the experience they
quantitative financial analysis of the alternative uses for had gained delivering commercial services back to the
the Boxer Towers available to the Ministry of Defence. conduct of core services, leading to improved quality in
This showed the wider markets solution to be the best terms of objectives and delivery.
choice (paragraph 2.20).
4 A survey (para 3.23) is under way by Partnerships UK to remedy the lack of information on wider markets activity (see also Appendix 1).

executive summary
Obstacles to wider market activity 15 Suitable personal and unit rewards would also be
needed to reward those who identify opportunities and
12 The potential for wider markets activity is highly to motivate those charged with turning the opportunity
variable across departments. Barriers to wider markets into a commercial reality. As a result of the Baker
activity include a culture of risk aversion and a lack of Review, (paragraph 3.30), incentives have recently been
commercially skilled individuals. Many departments have increased in one area within the existing public service
not attempted to gain an understanding of the nature or framework to reward scientific discoveries that are
full extent of potential opportunities arising out of their commercially exploited.
own assets or of the bodies they are responsible for.
There are difficulties in identifying and estimating the 16 In complex cases bodies are encouraged by the
potential benefits of, as yet, unrecognised opportunities. Treasury policy guidance to look for a private sector
A well-informed assessment undertaken by a trained partner, if one can be found, to:
Wider Markets Officer, with external help if appropriate,
n fund additional investment in people, infrastructure
on a systematic basis would be needed before any reliable
and resources;
attempt could be made.
n introduce commercial skills and routes to market
13 The profile of Wider Markets Officers varies between that the public sector is unlikely to have; and
departments. Only one third of Wider Markets Officers, as
n accelerate the development of commercial
at mid 2005, had been in post for more than a year and
opportunities so obtaining returns faster than might
engaged substantively with the initiative. Generally, the
be the case if the public body were to exploit its
Wider Markets Officers do not appear to be championing
assets alone.
wider markets to their departments, but respond when
opportunities are identified by individuals or bodies
within departments.
14 A businesslike approach to such opportunities would

necessitate good risk management and delivery skills,
allied to experience of making commercial decisions. The
acquisition of such skills would be likely to benefit core
work. Achieving these skills requires prior experience or
significant training. Some staff recruited from within the
civil service acquire these commercial skills on the job,
but their hard won experience is lost once they are posted
elsewhere, with new appointees starting afresh. Although
Partnerships UK runs a help desk, more extensive existing
wider markets knowledge and experience is not made
available easily and automatically to other public bodies
that have just identified an opportunity. There is often scope
to help the public sector avoid reinventing the wheel.

recommendations
On identifying underutilised assets On promoting ideas with

1 As part of their response to the Treasurys drive to revenue potential
increase efficiency, departmental management boards
5 Departments should monitor the effectiveness of
should include asset management, and thus the Wider
their current arrangements for collecting and rewarding
Markets Initiative, in the annual business planning of the
staff ideas for savings and for income generation. Where
department and its sponsored bodies.
there has been little response, departments should
mobilise management effort and consider increasing the
2 Departments have a responsibility for managing and,
incentives. One model of good practice is provided by the
on a regular basis, updating a comprehensive record of
Ministry of Defence Gems award scheme.
their assets. Departments should make sure that intangible
assets, including intellectual property, are also covered.
6 Based on the cases examined, there is currently
inadequate information on the profitability of much
3 Departments should conduct assessments of
wider markets activity. For each wider markets activity
potential for wider markets projects. These assessments of
departments need clear objectives and financial targets,
underutilised assets and their potential for wider markets
and accounting systems to measure financial performance.
activity should be made available to the Treasury and
Partnerships UK. Over a two year period, Partnerships
7 Partnerships UK should analyse and report at least
UK should aim to carry out an external review of those
annually on wider markets activity with a view to increased
departmental assessments that show neither activity nor
cross fertilisation and co-ordination of opportunities,
identified opportunities.
knowledge and practice across the public sector.
4 Departments should provide Wider Markets Officers,
on taking up their post, with training to equip them to
undertake a proper review and appraisal of opportunities.

executive summary
On becoming more businesslike 11 Public sector bodies that have run a wider
markets activity as a separately accountable cost centre,
8 A fresh approach has to be led from the top. and on that basis confidently forecast achieving a
Departments should nominate a champion at or close to sustainable level of revenue and profit, should give early
Management Board level, as the Ministry of Defence does, consideration to a change of structure to enhance business
to give the discretionary initiative a higher profile. and risk management. Depending on the scale of their
revenue, options include setting up an agency or trading
9 In selecting Wider Markets Officers, departments fund, or separately incorporating the relevant commercial
should see them as a long term investment and seek activities as a registered company.5 The option would be
individuals with commercial experience. The officers selected to introduce commercial discipline, additional
selected should have access to top management and accounting transparency and more scope to develop
resources, and spend sufficient time in post for the the business.
effective performance of their duties.
10 Partnerships UK should build on the training which it

has hitherto provided to Wider Markets Officers to embed
the skills, experience and capacity necessary to develop
and spread commercial skills that can lead to better
management and delivery of public services.
5 Under the proposals in the new Company Law Reform Bill these will be subject to audit and scrutiny by the Comptroller and Auditor General.

part one
Part one
Wider markets activity uses core assets more intensively

part one
The Treasury seeks improved value It involves making new, non-statutory, use of core assets,
through the sale or lease of goods and services in a
for money from public assets competitive market on a commercial basis. Many public
1.1 Successive governments have taken measures to bodies, such as the Post Office and the British Waterways
encourage better management in the public sector. In Board, already had a history of trading and operating
the late 1990s a number of measures were introduced to commercially before the initiative was launched.
encourage the public sector to become more businesslike
and focus on managing resources rather than cash.6 These 1.3 The initiative therefore encourages, but does not
include switching over from cash accounting to resource oblige, the public sector to adopt a more businesslike
based accounting, the establishment of a National Asset approach to making use of public assets. There are no
Register and the Wider Markets Initiative. The aim of the income generating or other targets. This is for a number of
measures was to encourage public bodies to understand reasons including concern to avoid such activity having
and manage their assets better. They encourage the disposal a negative impact on core activity and to avoid distorting
of non core assets and better utilisation of core assets. decision making in relation to commercial income
generating activities. The policy is that such activity must
not impact adversely on the delivery of core activity.
The Wider Markets Initiative has a role in the Departments have an incentive to undertake it as income
better management of assets generated from wider markets projects can be used to
1.2 Public assets such as land, buildings, people and offset administration costs and meet efficiency targets.9
intellectual property needed to deliver core public There are however cultural, bureaucratic and resource
sector activity can often be used more fully. The Treasury barriers which limit uptake of the initiative.
established the Wider Markets Initiative7 in 1998 and
contracted Partnerships UK to support it in 1999 (see 1.4 The benefits of wider markets activity include:
Figure 1 overleaf). This discretionary policy is about: n reducing the cost base and improving the skills
base in the public sector through the cash returns
changing the culture in Whitehall. Its about giving from sales revenues;
departments incentives to operate efficiently rather than just
telling them to do so. Its about the Treasury giving them
guidance and support. A partnership in agreement as well
as between government and the private sector.8
6 See Appendix 4: Resource Accounting for further information on the extension of resource accounting, already in use in some public bodies, to departments.
7 Selling Government Services into Wider Markets, Policy and Guidance Note, Enterprise & Growth Unit, HM Treasury July 1998.
8 Paymaster General, 26 October 1998, HM Treasury Press Notice 176/98.
9 The classification of wider markets income as negative expenditure means that it counts against Gershon efficiency targets.

part one
n the commercial experience gained for staff members, n the case for any new assets should be based on
directly relevant to contracting private sector requirements for delivering core departmental
resources to play a part in the better delivery of core objectives; and
services; and
n any substantial investment should normally come
n corporate income taxes on profits generated (if set up from the private sector.
as separate businesses).
1.6 The Treasury manages the policy with a light touch
1.5 The requirements of the Wider Markets Initiative are: as departments are free to decide, on a discretionary basis,
how far to engage with the initiative. As at late 2005 there
n new activity must be financed from within
was one Treasury official with policy responsibility for the
existing resources;
initiative. The Wider Markets Unit in Partnerships UK now
n there may be flexibility in the extent to forms part of the Commercialisation Team (together with
which income needs to be accounted for the Science and Technology Unit), with the equivalent of
on an annual basis depending on departments one full time dedicated person to provide:
usual arrangements;
n a help desk to respond to general queries;
n project specific support;
1 Support for the delivery of the Wider Markets
n a service to review Wider Markets projects and assist
Initiative is outsourced to Partnerships UK
in their development; and
Partnerships UK provides support for the Wider Markets n guidance material.
Initiative through a contract with the Treasury.
These services are free to public service bodies.
To deter waste, there is a capital charge on

fixed assets
1.7 To help improve asset management and prepare for
resource accounting and budgeting, departments were
Discretionary Guidance Contracted out advisory role
required to identify and value their assets. The National
Asset Register was introduced in 1997 and revised in 2001
to provide greater visibility of these assets. Generally, there
is a disincentive to allow assets to lie underutilised as
part of resource accounting assets attract a capital charge
Support of 3.5 per cent. This is intended to encourage the disposal
Departments
of unnecessary assets and the effective use of those that
are essential. Wider markets activity helps departments
reduce the impact of the capital charge by allowing them
Advice to generate income to offset the charge.
Guidance has helped encourage wider

market activity
No activity Simple deals Complex deal 1.8 Public bodies have a long history of ad hoc
commercial activity. For the most part such activity
Departments keep revenue from variable level evolved out of arrangements at a local level. The Treasurys
of WMI activity Fees and Charges Guide is the longstanding guidance10
Source: National Audit Office on costing government services. Although primarily
concerned with public bodies providing statutory services
to the public and others, it also contains guidance relating
10 The Fees and Charges Guide, last published in 1992.

part one
to commercial services sold to the wider public sector, forming these ventures, which includes the sale of water to
the private sector and general consumers. This guidance the water utilities. Another venture, the Watergrid project,
offers flexibility on the costing and pricing of products and involved treating water for sale to new customers, the end
services supplied by departments, agencies, trading funds users. This project did not meet its targets because the new
and other public bodies: market sectors failed to develop as expected. While judging
the Watergrid project as unsuccessful, British Waterways
While each service is normally expected to recover full
has used the experience gained to help it develop several
cost, there are some circumstances in which this general
new projects in partnership with the private sector,
principle may be modified for commercial services to
primarily in property development. The most recent is to
achieve greater efficiency and sensitivity to patterns of
develop their estate of public houses in a venture, with a
demand or cost.
private sector partner, called The Waterside Pub Partnership.
1.9 Specific guidance has been produced for the Wider
Markets Initiative11 to help public bodies to improve the
oversight and management of their commercial activities. 2 Examples of types of Wider Market Projects
Treasury guidance on wider markets12 starts with the
proposition that a full cost attribution should be used Across the public sector there is a variety of wider markets activity.
although it also allows for exceptions. The Ministry of
Facilities
Defence has been particularly pro active in improving
the overall quality of the management of its commercial n Leasing of spare warehousing
activities, including producing its own detailed guidance n Hire of spare office and conference facilities
for internal use. n Hire of sporting facilities
n TV and film opportunities: sites, extras, video footage, etc

A wide variety of wider markets activity
n Dual use of specialised physical assets infrastructure
has been undertaken and equipment
1.10 Wider markets activity covers exploiting software, n Restaurants, Cafes and Gift Shops
databases, expertise, skills, brands and intellectual
property as well as physical assets such as land and Services
buildings. Utilising these assets more fully can involve n Commercial sales of in-house services: printing, translation,
selling existing goods and services, developing new goods mail sorting, and dispatch
and services from existing assets, licensing and leasing n Advertising and sponsorship
arrangements, and sponsorship activities (Figure 2).
n Merchandising
1.11 When undertaking wider markets activity public n Licensing of IT applications

bodies must conduct detailed analysis of the proposed n E-Services
activity and their capacity and ability to deliver such
n Sales of training/teaching courses
activity successfully. The level of analysis or due diligence
should be proportionate to the risk profile of the proposed n Consultancy services
activity. Wider markets activity encompasses projects with
Products
very different risk profiles, illustrated in simple terms by
the quadrants in Figure 3 overleaf. n Licensing and repackaging of datasets
n Sale of anonymised data

1.12 British Waterways Board has a range of commercial
n Value added products based on public information
activities, generating 88.3 million in 2003-04 towards the
care and upkeep of the waterways.13 British Waterways Source: Partnerships UK website
has adopted a portfolio approach to managing its risks in
11 Both Treasury and Partnerships UK have produced guidance on commercialisation topics (See Figure 10).
12 Selling Government Services into Wider Markets, Policy and Guidance Note, Enterprise & Growth Unit, HM Treasury July 1998. Originally issued in 1998
and updated in 2002 to reflect changes in the law.
13 British Waterways Board income from new wider markets ventures was 1.8 million in 2003-04 and increased by 5.1 million in 2004-05 (Source: Annual
Report and Accounts).

part one
1.14 The Army has taken a wider ranging approach to the

3 Different risk profiles of wider market activity14 initiative. In developing a pipeline of new products, such
as the army training shoe, it is seeking to identify and
The risk associated with a new business activity increases with exploit separate segments of the market. The target market
its novelty. Dealing with existing customers and products is
lower risk. Dealing with either new products or new customers
for each product is different and, to succeed, the Army has
increases the risk, while attempting both at the same time had to position the product for each market segment. To
has the highest risk. The diagram shows the spread of wider achieve this it has selected, for pilot projects, a number
markets activity. of private sector partners which have what it considers
appropriate experience.
New Medium Risk Higher Risk
Market Exploiting new markets has most impact at
n Probate online n Watergrid
n Boxer towers
local level
n RAF 1.15 While at central government or even departmental
merchandising level the Wider Markets Initiative is currently having a
Market development Diversification small impact, at a local level the position is different.
The local level is where most wider markets revenue
Existing Lower Risk Medium Risk
is applied and where even a few thousand pounds
Market can make a significant morale boosting difference by
n Waterside inns n CEFAS
allowing deferred spending to take place. The Department
Technology
n Flagship training for Constitutional Affairs has been able to undertake
n Army Training a programme of rolling office refurbishments from the
Shoe
proceeds of hiring court facilities for use as meeting
Market penetration Product development venues when they are not in use as courts.
1.16 The opportunity to earn additional revenue is

Existing Product New Product
also built into the provisions of some new facilities by
Source: National Audit Office
the private sector, with a view to selling this capacity
under wider markets arrangements. Flagship Training Ltd
markets and project manages major and bespoke training
1.13 For the most part wider markets activity has involved which is delivered by the Royal Navy to commercial
the development of existing products or knowledge to companies and foreign customers. Flagships facilities
enhance their appeal to customers. Some projects such have additional capacity, over and above the Royal Navys
as the Probate Services Probate Online (Case Example needs. This capacity is marketed on a commercial basis,
One: Probate Online) target new markets. In this case one for instance providing engineering training to Network
market segment is non United Kingdom residents, based Rails apprentices. The arrangements allow this additional
overseas. The revenue earned is additional funding from training capacity to be available to the Royal Navy if
outside the United Kingdom tax base. needed. In this way the Royal Navy has acquired a surge
training capacity without incurring either the initial build
cost or the long term maintenance cost.
14 For an explanation of the categorisation used for selecting the cases in Figure 3, see Appendix 1.
10 the Wider Markets initiative

part one
cASE ExAMPLE OnE
Probate Online
A will is a formal document setting out what a person wants to
happen to their possessions after their death.
Since 1858 wills subject to probate have been registered with

the Probate Service. The probate service maintains a register of
wills containing the name of the person, their occupation, their
address and the date of their death. This accurate information is
of value to genealogists.
The information is currently held in 1,013 folio bound volumes

at the Principal Probate Registry in Holborn, London. The public
can examine the folio volumes, which are only available during
office hours, and for a statutory fee obtain a copy. The copying
service is provided under contract to the Probate Service by
Iron Mountain (UK) Limited.
The Probate Service examined the demand for a digital version

of the registers and assessed that demand for copies of extracts
of the register could be increased by between 700 and
2,000 per cent. It is anticipated that a substantial part of this
revenue will be generated from non United Kingdom residents.
On the basis of this predicted increase in demand for their
service Iron Mountain (UK) Limited agreed to meet the full cost
of digitising the entire probate record back to 1858. They will
also install and maintain a new IT system for the project.
The Probate Service aims to make the indexes available on-line,

from 1996 to the current date, this financial year. They will then
work back from 1995 to 1858, making sections available
on-line, as and when they are digitised, so that by the end of
the following year, all records back to 1858 will be published
on the Internet.
The Probate Service retains the intellectual property rights in

the dataset and has not had to make any contribution
towards the cost of these projects. It will continue to receive its
share of the copying fee. The public benefits from an improved
level of service.
THE WIDER MARkETS INITIATIvE

part two
Part two
Where undertaken, Wider Markets activity has generally
delivered benefits

part two
Improving the utilisation of assets 2.3 The scale of potential wider market opportunities
for each department varies. We would intuitively expect
has not generally been a priority those with large headcount and/or large holdings of assets
2.1 Over the last decade the public sector has taken to have wider market opportunities (Figure 4 overleaf). A
significant steps to dispose of surplus assets. Less effort coherent, auditable and well-informed assessment of the
has gone on encouraging better utilisation of core assets opportunities on a systematic basis by departments would
although this has started to change. Following the Lyons be needed before any reliable figures could be given as to
Review of public sector asset management the 2005 the potential of such activity across the public sector.
Budget required all departments to develop an asset
management strategy, driven by their business plans, as There has been no systematic attempt
the responsibility of finance directors, to be considered to evaluate the potential for wider
and approved at board level. In interviews with several
markets activity
departments shortly afterwards (in May/June) Finance
Directors agreed that the Wider Markets Initiative 2.4 On the whole, our interviews with finance directors
probably deserved more attention than hitherto. show that many departments have in the past been unable
or unwilling to gather the information required to conduct
2.2 Even the best run organisations cannot achieve analysis of the intensity with which assets are used. In the
100 per cent utilisation, requiring spare capacity to private sector, shareholders can act as a strong incentive
account for equipment failures, training needs, sickness on company management to develop and implement
and variations in demand. Some departments, such active asset management strategies to ensure that their
as the Ministry of Defence, need to keep significant assets are used efficiently to achieve business objectives.
capacity available in case contingent events occur. Other In past years, the subject of asset management had been
bodies such as the Centre for Environment Fisheries and given a low priority by public sector management boards,
Aquaculture Science require high levels of particular given the demands of meeting ambitious headcount
expertise for a short period to complete tasks, such as the and asset disposal targets. The Budget statement 2005
National Marine Monitoring programme. Both have found (paragraph 2.1) and the corporate governance code
uses for this spare capacity (paragraph 2.11) but other (paragraph 3.13) should encourage this.
public bodies have been less active.
the Wider Markets initiative 13

part two
4
The scale of Departmental

Resources
The major departments have a varying quantity of fixed assets and human resources.
Government departments
Fixed assets Up to 5,000 staff 5,000-15,000 staff More than 15,000 staff
Over 10,000 million DfT MoD*
FCO* DoH
1,000 10,000 million HM Treasury DTI Home Office
DfID DCA
Less than 1,000 million DCMS* DEFRA DWP
DfES1 ODPM HMRC
Cabinet Office
NoteS
1 Department for Education and Skills loans have been excluded for the purposes of this table.
Further detail is included at Appendix 2 Departmental Assets.
* asterisked departments have made recent assessments.
2.5 A specific aim of the Wider Markets Initiative is The role of Wider Markets Officers has been
to improve the exploitation of public sector intellectual helpful when given priority
property. Across the public sector there have been
difficulties in identifying and measuring the value of 2.6 Although, as part of the Wider Markets Initiative
intellectual property assets.15 Significant national datasets each department is required to have a Wider Markets
such as: the Driver and Vehicle Licensing Agencys driver Officer, the profile of Wider Markets Officers varies
records and the Ordnance Surveys National Geographic between departments (Figure 5). Generally, the Wider
Database have not been measured and recorded as Markets Officers do not appear to be championing
assets.16 Some omissions may have substantial value wider markets to their department, but respond when
and potential. opportunities are identified.
15 Creating Knowledge Creating Wealth Realising The Economic Potential Of Public Sector Research Establishments, a Report By John Baker To The Minister
For Science And The Financial Secretary To The Treasury, August 1999.
16 The Comptroller and Auditor General has qualified the Ordnance Surveys accounts in this regard. The DVLA income cannot be forecast with any degree of
certainty and is currently not significant in terms of the Driver and Vehicle Licensing Agency accounts.

part two
2.7 Energetic Wider Markets Officers in public bodies

5 Departmental Wider Markets Officers have a have provided information and training aimed at ensuring
co-ordinating role
that career civil servants have a good understanding
of their role in developing and delivering new public
Departmental Wider Markets Officers are intended to have a
catalytic role in the implementation of the Wider Markets
services on an enhanced basis. The Ministry of Defence
Initiative at departmental level, but few devote much time to provides a good example of good practice in such activity.
the initiative. In most departments the post of the Wider Markets
Percentage of WMO time spent on Wider Markets
Officer is not a full time post, but is an adjunct to other
responsibilities. In some departments a part time post is
appropriate but this is not always the case. Moreover, the
100 6%
effectiveness of the Wider Markets Officers appears to be
90 diluted by frequent changes in post and personnel. Lists
of Wider Markets Officers are often out of date. In some
80
cases, previous Wider Markets Officers did not know who
70 currently occupied the post. This will inevitably disrupt the
60 flow of information within departments, and also between
departments, Partnerships UK and the Treasury.
50
40 2.8 There is also little continuity in post only one third

of Wider Markets Officers, as at mid 2005, had been
30
engaged with the initiative for more than a year Figure6
20 18% illustrates the difficulties faced in such departments.
This lack of engagement may have resulted in potential
10
worthwhile wider market activity being unrealised. A
12%
5 positive correlation is apparent between the level of
1 65% activity prevalent in a department and the time allocated
to the activity by the Wider Markets Officer.
0 10 20 30 40 50 60 70
Percentage of surveyed WMOs
6 Typical quotes from Wider Markets Officer survey replies
The quotes below represent a selection of replies to our queries regarding Wider Markets Officers.
Exploitation of wider markets has not

I do not have formal links with
There is no specific budget for Wider
been a priority in recent times.
colleagues dealing with asset management Markets activities.

and efficiency.

We did an assessment in 1998 when [We] were not aware that income
generation and asset management/
the initiative was first announced, but not
We currently do not have a Wider efficiency drives were collectively known
much came from it.

Markets Officer in post. as WMIs within the Department, so
could not identify any Wider Market
Officers within their boundaries.

I spend virtually no time on Wider
[Trusts] have staff looking at finance
Markets issues and it is not assessed in and procurement issues but not specifically
I am babysitting this work. until I
my performance appraisal.
dealing with Wider Markets issues.
go off on maternity leave.


part two
It is unlikely that the 77 per cent of Wider Markets Officers

cASE ExAMPLE TwO who spend five per cent or less time on the initiative
(Figure 5) can be fulfilling their primary responsibilities
effectively, which are:
n to provide a point of contact for both external and
internal parties;
n to provide assistance and guidance to project
teams in identifying and establishing wider markets
opportunities; and
n to maintain a log/knowledge of current wider
markets activity within the department.
Where specific factors apply there have been

Boxer communication Towers
successes, elsewhere the impact is patchy
The 114 Boxer communication towers were part of a network,
built during the cold war, to provide survivable secure 2.9 Our study has noted a number of successful
communications between Royal Air Force stations in the event applications of the Wider Markets Initiative. At present
of Warsaw Pact attack. Once the network was deactivated the the cash sums raised provide an incentive for the activity
high specification Boxer Towers were redundant. The towers but tend to be modest, sometimes measured in thousands
remained an annual cost due to the need for safety inspections.
of pounds, and for reasons discussed in paragraph 3.22
Demolition would cost 50,000 per tower. The location of
the towers within secure Ministry of Defence facilities made the net profit figures are unclear. Nevertheless, the case
disposal difficult. examples show assets being used more productively,
Following a competitive process the Defence Communications
costs being cut without affecting services (apart from
Services Agency entered into partnership with NTL (now enhancements) and improvements to staff skills and
known as Arqiva) for a 20 year period in December 2001. morale. The nature of the activity is diverse both in type
Arqiva is paid a basic lease fee of 3,000 per tower for and scale ranging from logo bearing thimbles to large
managing, maintaining the towers to an agreed standard and property deals. These functioning projects tend to have a
marketing them.
number of features in common.
Arqiva generates revenue by sub letting space on the towers to
mobile telephone operators. The towers are attractive to third 2.10 The most consistent feature of active wider markets
party operators because of their secure locations and the high
projects is the presence of an entrepreneurial individual
quality of the towers. From the gross revenue Arqiva deducts a
ten per cent management fee. The remainder of the income is with the skill, drive and determination to push the
split 88 per cent/12 per cent between the Ministry of Defence project forward. Generally, although not exclusively, our
and Arqiva. Over the life of the deal the Ministry of Defence study found these individuals have some private sector
expect to achieve average annual gross revenues of 720,000. experience. They tend to be in senior positions, such as
The deal is now being extended to other Ministry of Defence chief executive in smaller bodies and middle ranking
towers and to leases of land for new tower builds (subject to positions in larger bodies, where they are both sufficiently
planning permission being granted). For new tower builds the close to the project to grasp the detail and senior enough
cost of maintenance reduces 1,500 per tower per annum, but
to influence decision making within the organisation. This
the profit share remains the same. Five percent of the Ministry
of Defences share of the revenue is retained by the Defence
project management function is separate to the creation
Communications Services Agency to cover administrative costs. of the business idea.
The Defence Communications Services Agency has used some
of this money to establish a small development fund to cover 2.11 The creation of business ideas for wider markets
the cost of adding towers from other communications systems projects has come from a number of sources. It is
to the scheme. The remainder being returned to the unit or
something which is not easy to do in a systematic manner.
establishment at which the relevant tower is located.
Our case examples show a mixture of opportunity and/or
necessity to be common sources of business ideas for
the wider markets case examples we examined. The
Boxer Tower project (Case Example Two: Boxer Towers)
made particular use of the opportunity presented by the
mobile telephone industrys need to build out their third
generation mobile phone networks.
6 THE WIDER MARkETS INITIATIvE

part two
The Centre for Environment Fisheries and Aquaculture

Science (Case Example Three: CEFAS Technology) is cASE ExAMPLE THrEE
an example of a public body successfully addressing a
decline in the funding of its core activity through wider
markets activity.
When present, management commitment has

overcome concerns about vires, regularity,
probity and competition that inhibit activity
2.12 Public bodies have come into existence by a number
of means, for example: a Royal Charter or an Act of
Parliament. A body may not have the vires (legal powers)
to undertake wider markets activity. There may, for
example, be constraints on the scope of a public bodys
activity or its ability to form a joint venture company. cEFAS Technology
While bodies of similar type may share limitations that The Centre for Environment Fisheries and Aquaculture Science is
can be significant barriers to activity, other limitations are an executive agency of the Department for The Environment Food
unique to particular organisations and may not be obvious and Rural Affairs.
(Case Example Four: Military Personnel, overleaf). CEFAS has an annual turnover of approximately 40 million.
Two thirds is generated through a memorandum of understanding
2.13 The exact nature of the body determines the ease with DEFRA. The remainder comes from contracts with: the
with which it can conduct wider markets activity. Some European Union; the Food Standards Agency; other government
bodies may need to seek specific Parliamentary authority departments and foreign governments. The majority of its wider
for expenditure to conduct wider markets activity. Our markets activity (i.e. non-DEFRA related work) takes the form
of consultancy work. In its 7-8 years as an agency commercial
study noted a particular difficulty for executive agencies
activity has grown from 200,000 to 10,000,000 per annum.
that operate as net agencies.
As a net cost agency there exists an array of hindrances to
commercial activity. Particularly they relate to the annual limits
2.14 A net agency is a public body which is not
imposed by government accounting rules. CEFAS work within
structured solely as a spending body, but has trading the resource accounting guidelines but have found that a spin-off
income and seeks to balance its books in each financial company, CEFAS Technology Limited, which was created to deal
year. This requirement may act as a disincentive to such a with an early alliance, has also enabled limited risk management
body undertaking wider markets activity which is unable on one contract by providing more flexibility across year ends.
to break even within one year. Few ventures, public This company is 100 per cent owned by the Secretary of State,
with the shares held in trust by the Chief Executive of CEFAS.
or private, are able to achieve this speed of return. The
effective result is that net agencies are initially prevented CEFAS believes that participation in the Wider Markets Initiative
from directly undertaking any wider markets activity with has brought the changes described below:
a lengthy payback period. Nevertheless it is possible for n Better utilisation of assets By commercially exploiting assets
such barriers to be overcome. The Centre for Environment which are not being fully used, CEFAS has reduced the cost of
providing core services to a level which DEFRA can afford.
Fisheries and Aquaculture Science took such activity
forward by spinning off a company (Case Example Three: n Changed staff behaviour While there has been some
CEFAS Technology). resistance from longer service employees, many new hires
more readily accept the concept of commercial activity. The
activity has had a positive effect on staff skills. Exposure to
contract based work has improved skills generally and in
particular meeting obligations and budgeting.
THE WIDER MARkETS INITIATIvE 7

part two
2.15 Where civil servants engage in commercial activities

cASE ExAMPLE FOur this can give rise to concerns, for example, about conflicts
of interest between statutory duties and commercial
activities. Our study found no examples of conflicts of
interest. We found that the current guidance and regulations
provide an adequate protection for both individuals and
organisations if they are applied properly.17
2.16 Competition issues can pose problems for public
bodies. There have occasionally been accusations of unfair
behaviour or concerns about state aids. The Office of Fair
Trading is currently undertaking a Market Study,18 due
to report in 2006, into the market for public information.
Separately our study found that there already exists a
substantial body of national and European competition
Military Personnel law applicable to public bodies undertaking wider markets
Military personnel are directly commissioned, for officers, activity. To comply with such rules, guidance generally
or enlisted, for other ranks, into the service of the Crown. requires pricing in a competitive market to recover full
Consequently, they have no formal contract of employment. cost, including a cost of capital charge.19 Ensuring that all
Their service is governed by the Service Discipline Acts and the regulations are complied with unavoidably absorbs
Queens Regulations.
management time.
Military personnel are not contracted to carry out any specific
function, but put under the orders of superiors appointed by 2.17 Public bodies have faced and addressed these
the Crown. The regime created by the above Acts of Parliament difficult issues in a variety of ways. In England, Wales
and Regulations require military personnel to obey lawfully and Scotland, the Forestry Commission sought legislative
given orders. Failure to obey a lawful order is a military changes from the relevant parliamentary body for their
offence punishable by a fine, detention or imprisonment.
commercial activity.20 The Centre for Environment
Equally the Service Discipline Acts and Regulations make it
quite clear that for an order to be lawful it must have Fisheries and Aquaculture Science established an
a military purpose. incorporated subsidiary to conduct its commercial
activities. Each situation required a tailored solution.
This creates a problem for the armed forces in respect
of wider markets activity. Purely commercial activity Wider Markets Officers we interviewed all noted the need
unrelated to the core activities of the armed forces for better access to information and practical assistance to
may lack a military purpose. If that is the case then avoid different bodies reinventing the wheel.
military personnel cannot be ordered to undertake the task.
As no other lawful method of issuing instructions to members
of the armed forces exists a purely commercial activity
cannot be undertaken.
The Ministry of Defence has to ensure that any wider markets

activity it undertakes using service personnel has a military
purpose. For example, its commercialisation of the army training
shoe has a military purpose because it is used by army personnel
to achieve the standard of fitness required by them to be ready to
take part in military operations. Furthermore the revenue earned
is fed back into improving morale at a local level.
17 The Office of Science and Technology has produced guidance on managing conflicts of interest (which is available on their website www.dti.gov.uk/ost).
This involves procedures to register, assess and monitor potential conflicts. In general commercial activities may only be taken forward after the development
of specific measures to manage risks relating to such conflicts. The arrangements rely on transparency and oversight from senior management who do not
stand to benefit.
18 The study will look at whether or not the way in which Public Sector Information Holders supply information works well for businesses. It will examine
whether Public Sector Information Holders have an unfair advantage selling on information in competition with companies who are reliant on the Public
Sector Information Holders for that raw data in the first place.
19 Capital charge in an indicative range between 5.5% and 15% depending on the degree of risk.
20 British Waterways Board used the Regulatory Reform Act to gain the vires to enter into joint ventures.
THE WIDER MARkETS INITIATIvE

part two
2.18 Commercial activity, by its nature, requires bodies

to take on a degree of risk. Several of the project bodies 7 Appraisal of the Boxer Towers project
examined in this study noted an aversion on the part of
The Ministry of Defence benefited from seeking a Wider
their sponsoring departments to letting them take on the Markets solution to the issue of its redundant Boxer Tower.
commercial risks associated with wider markets activity,
Option Net present Additional cost
fearing that the commercial activity would prove a value at 3.5% of option over WM
distraction from the provision of core services. Without the ( million) project ( million)
support of sponsoring departments it is almost impossible
Wider Markets project 15.4 -
for projects to get off the ground. The timely involvement
of the department is required for the approval processes No private partner 12.3 3.0
referred to in paragraph 3.14 and to address concerns raised Do nothing (1.8) 17.2
by commercial activity (paragraphs 2.15 to 2.16). Where Demolish phased (5.5) 20.9
departments have little appetite for commercial activity,
Demolish immediately (6.3) 21.6
projects have little prospect of successful implementation.
2.19 Already there is a noticeable difference in outcomes
between departments. Some bodies and departments NOTES
arrive at a view that they either cannot or should not Net present value of option costs and revenues between 2002 and
undertake wider markets activity. Others, sometimes 2021 in 2005 prices.
driven by funding pressures, have seen opportunities and Figures rounded to one decimal place which may appear to
produce anomalies.
invested time and resource into the initiative. The Ministry
of Defence does not yet collect information to allow an
accurate estimate of the added value achieved by its wider
Public servants have had to acquire new skills
markets activity, but it already recovers many times the
to act commercially which can enhance the
cost of the additional 200,000 per annum it puts into
supervising and promoting wider markets activity. efficiency of public services
It projects a steadily increasing income from wider 2.21 There is a contrast between traditional public
markets activity. sector drivers and those in the commercial sector. Public
2.20 The main drivers for this activity in the Ministry services are generally focussed on delivering services to a
of Defence, as elsewhere, include budgetary pressures budget, stretching delivery or cutting scope as necessary.
and a desire to generate extra revenue to spend on core Conversely in a more competitive arena, private sector
activities. The Armed Forces and the Ministry also value business must deliver the most appealing and efficient
the enhanced reputation and benefit to community service to win custom. Several public bodies reported that
relations from wider markets activities. As part of our staff job satisfaction increased with the additional skills
case example work we conducted a review of the options and responsibilities required when undertaking wider
available to the Ministry of Defence in dealing with the markets activity which involved gaining commercial skills.
Boxer Towers (Case Example Two: Boxer Towers, page 16). The Centre for Environment Fisheries and Aquaculture
We examined the five alternatives. For each alternative Science told us that staff used in wider markets activity
we calculated the Net Present Value of the capital and brought the commercial experience they had gained
operating costs and revenues. The No Private Partner back to the conduct of core services, leading to improved
option gives an estimate of the extra cost the Ministry of quality in terms of focus on meeting objectives and
Defence would have incurred without a private partner. delivery to agreed timescales.
The wider markets option shows a Net Present Value of
15.4 million, which is 3 million more than the next best
option. The results are in Figure 7.

part two
Some private sector businesses have benefited

cASE ExAMPLE FivE from public assets at no charge
2.22 Some private sector businesses have obtained use
of public sector assets at no cost. These businesses are
sometimes taking advantage of a non commercial public
sector culture. In some cases, such as the merchandising
of military insignia, it happens because of historic custom
and practise which has led to the loss of intellectual
property rights (Case Example Five: RAF Merchandising).
Other situations have arisen from a legislative framework
(Case Example Six: Congestion Charging) which failed to
anticipate the ways in which public bodies would address
public service or asset management issues through
commercial activity. The congestion charging example
illustrates the need for the public sector to think about and
plan for the use of all the public assets involved in
rAF Merchandising a new activity. This is a preliminary to commercial
The Hague Convention on rules concerning air warfare negotiations aimed at allocating costs to the appropriate
require military aircraft to carry an exterior mark indicating its revenue streams.
nationality and its military character. For this purpose the
United Kingdom uses the roundel. While several variations
have been used, the most common version of the roundel
consists of a red spot surrounded by concentric circles
of white and blue.
In 2003, as part of its commercial activities, the Royal Air Force

sought to trade mark the roundel. The high street fashion group
Arcadia, owner of Dorothy Perkins, Topshop and Burton, issued
a challenge to the trademark application, arguing the roundel
was brought into the public domain by the Mod movement of
the 1960s.
A trade mark is a type of intellectual property which can

be registered for a name or mark that distinguishes one
organisations goods and services from another. Registration
gives a body exclusive use of the mark.
In January 2004, a Trade Marks Registry hearing ruled in

favour of Arcadia, which argued that the roundel has been
used on clothing worn by Mods, the scooter-riding fraternity
in fashion in the sixties who were popularised in the film
Quadrophenia. Therefore, Arcadia were able to argue
successfully that the Royal Air Force should not be able to
restrict the use of this mark which, in the minds of public,
does not identify clothing as coming from the Royal Air Force.
The Ministry of Defence has been given the sole rights to

use the roundel on items other than clothing. Following this
experience the Ministry of Defence has established a tri-service
intellectual property rights group to manage the usage and
enforcement of rights it has in the intellectual property of all
three services.
20 THE WIDER MARkETS INITIATIvE

part two
cASE ExAMPLE Six

The scheme is administered by a Private Sector Service Provider
(The Contractor) under contract to Transport for London. If a driver
has not paid the congestion charge by the due time, the name and
address of the registered keeper of the vehicle will be collected by
the Contractor from the Driver and Vehicle Licensing Agency (DVLA)
and a penalty charge notice, at a level set by Transport for London,
will be sent out. An average of some 165,000 penalty notices are
issued per month. The Contractor charges Transport for London
4.90 per notice for undertaking this activity.
In 2004-05 the scheme generated total revenues of 190 million,

of which 72 million was enforcement income. Transport for
London incurred annual costs of 92 million out of which The
Contractor expects to earn a cumulative 230 million over
the next five years.
The Transport Act 2000 obliges The Driver and Vehicle Licensing
Agency, at the Agencys expense, to provide access to its
congestion charge
vehicle databases. The Agency also provides and maintains
The London Congestion Charging Zone incorporates communications links between itself and the administration site.
eight square miles of central London. Drivers pay a flat fee However, the Act gives the Agency no power to charge for the
for entering this zone between 7am and 6.30pm Monday provision of any of these services, so they are supplied free of
to Friday (except public holidays). The scheme was introduced charge. The provision of this information costs the Driver and
on 17 February 2003 using powers in The Greater London Vehicle Licensing Agency 800,000 per annum. In contrast the
(Central Zone) Congestion Charging Order 2001, under the 157 parking enforcement companies who access data under
framework for road user charging set out in The Transport The Road Vehicles (Registration and Licensing) Regulations 2002
Act 2000. pay the Agency 2.50 per enquiry.
THE WIDER MARkETS INITIATIvE 2

part three
Part three
There is scope for the initiative to have greater impact

part three
3.1 The Wider Markets Initiative has not achieved its full There have been other over-riding
potential. This is because the initiative faces a number of
obstacles, including the low priority it receives compared management priorities
to making direct efficiency savings. As discussed in 3.3 Our interviews with senior management in
paragraphs 2.12 to 2.16, there are a number of typical departments show that achieving efficiency targets is
concerns, for example: usually an overriding priority. Two reviews published
n Undertaking commercial activity may not be in 2004, as part of the Governments overall efficiency
seen as appropriate. agenda, resulted in targets being set for efficiency gains.21
The Lyons December 2004 review also recommended that
n Legal powers may not cover commercial efficient management of retained assets should be explicitly
activities (vires). prioritised and should include the more intensive sweating
n The possibility of potential conflicts of interest of assets. It noted weaknesses in managing intangible assets
with statutory duties or for staff. and made the following recommendation:
n Whether competing with the private sector A much more robust approach is needed across the
raises difficulties. public sector to identifying, valuing and exploiting
intangible assets. Current practice is unacceptably
n The risks inherent in commercial activity.
variable. Steps should be taken to re-energise activity
within departments and their sponsored bodies to identify
3.2 A more businesslike approach across the public
and exploit intangible assets.22
sector would help overcome these and other obstacles
and would be likely to lead to worthwhile benefits. The
3.4 As described in paragraph 1.3, targets are not
challenge from the top down, and learning from private
considered appropriate for wider markets activity. There
business, is to improve knowledge management as well
are sound reasons for selecting a voluntary initiative.
as asset management. It would require: putting effort into
The absence of revenue targets for wider markets activity
identifying opportunities; managing the risks and assessing
reinforces departments confidence that they will be
the results; the acquisition of skills; and greater personal
able to keep the commercial income generated.23 It
and unit rewards within the existing public service
reduces the fear of budget reductions as a result of
framework. In more complex cases departments may need
expected revenues from wider market opportunities when
a private partner.
Government funding priorities are balanced across the
range of public spending.
21 Well Placed to Deliver? Shaping the Pattern of Government Service: Independent Review of Public Sector Relocation, March 2004. Releasing resources to the
front line: Independent Review of Public Sector Efficiency, July 2004.
22 Towards Better Management of Public Sector Assets, a Report to the Chancellor of the Exchequer by Sir Michael Lyons, December 2004: Recommendation 8.
23 Treasury spending teams should be consulted on how income should be apportioned where a departments aggregated annual income from wider markets
projects exceed 5 per cent of discretionary spending within the Departmental Expenditure Limit.

part three
3.5 In addition, many departments lack commercial skills The lack of an obligation to
and forcing them to undertake wider markets activity would
absorb senior management time, particularly in finding assess opportunities has left
appropriate staff resources. There is also a risk that pressure some assets underutilised
from the centre could inadvertently lead to inappropriate
risk taking. This might be caused by failing to get to grips 3.8 Despite Treasury guidance which states that
with all the guidance and/or by a lack of commercial departments should appoint a Wider Markets Officer,24
experience. Nevertheless, giving greater priority to treating some departments have not done so (see Figure 6),
management of core assets in a businesslike way, would be or have not allocated any time for training. Given the
very likely to lead to greater efficiency. benefits of a professional approach to utilisation of core
assets, it would be reasonable to expect departments to
task Wider Markets Officers, after training, with carrying
The public sector can do more to out a coherent and auditable assessment of the potential
opportunities available. Deciding not to pursue wider
recognise and exploit opportunities markets without such an assessment risks foregoing upside
benefits that should be evaluated before a do nothing
Public bodies would need to think in business option is selected.
development terms
3.9 Partnerships UKs business strategy takes into account
3.6 To engage successfully in wider markets activity
the limitations it faces as a change agent, in mobilising the
staff require a broad range of business and intellectual
public sector largely through guidance and co-ordination.
property management skills, allied to the commercial
In terms of project support a limited staff resource,
experience to assess opportunities realistically and to
amounting to one full time equivalent staff member, has
negotiate successfully. Achieving this requires significant
unavoidably led to giving priority to those departments
training or prior experience. Our study found that where
and public bodies that have sought assistance.
staff undertaking wider markets activity were recruited
from within the civil service, few had any commercial
3.10 Partnerships UK needs doors to be open, at least
experience and were forced to learn the required
for an informed preliminary review of wider markets
commercial skills on the job. When, in accordance
opportunities. But in many cases there has been no active
with normal practice, those staff were promoted or
interlocutor within the public bodies, even on a part-time
posted elsewhere few organisations had in place plans
basis, who has stayed in post long enough to conduct a
to consolidate the acquired commercial skills and
joint assessment.
experience, with new appointees starting afresh.
3.7 One of the hardest parts of launching a new

venture is the creation of the initial business idea. In Re-energising the Wider Markets
the private sector, venture capital firms recognise that Initiative requires leadership and
most deals result from the endeavour of entrepreneurial
individuals. Venture capital firms, however, employ
commitment, at all levels, to a
specialists in developing industries and technologies businesslike approach
to identify opportunities. In the public sector greater
3.11 Based on the Wider Markets Officer survey and
specialist resource would be needed to assess whether
Finance Director interviews, we have found limited
the scale of wider markets opportunities was sufficient to
awareness of the Wider Markets Initiative by both senior
justify adding resources. Greater take-up of training (see
and middle management. This was most noticeable in
paragraph 3.26 and following) and examination of other
those departments that considered their opportunities to
bodies wider markets ventures to see if the opportunity
be limited. Success depends on motivational leadership as
could be adapted and applied to their own organisation
identified in our earlier report into commercialising public
would also be beneficial.
sector science:
24 Selling Government Services into Wider Markets - Policy and Guidance Note HM Treasury.

part three
Our examination has shown that where there has been realistic timeframe. All of the above require public bodies
committed and effective leadership at both senior and to have in place the appropriate approval processes and
middle management level there has been significant commercial management frameworks to ensure the proper
progress in constructing commercialisation deals with the conduct of commercial activity.
private sector. Leadership has been a major factor in the
fostering of a culture that promotes commercialisation 3.15 There is some evidence that opportunities have been
a prerequisite for success and has built the capabilities missed because of the lack of advance planning, low
needed to support this culture, without compromising the prioritisation of commercial opportunities or slow reaction
core public service role in scientific research.25 times or some combination of the three. Like others, the
Centre for Environment Fisheries and Aquaculture Science
3.12 Commercial activity in the public sector presents has found that public procurement rules and approval
more challenges than those faced by the private sector procedures can, and on occasion do, conflict with the
entrepreneur. There are significantly more regulatory timetable of commercial partners. For similar reasons,
and management hurdles to cross. Before becoming the Driver and Vehicle Licensing Agency was unable to
operational, projects need at least the passive support of submit a bid to produce voter registration cards for the
senior management within departments. A rigid focus on Northern Ireland administration when in a position to
core activities over the medium term, for example two to offer a technically sound solution. This would have used
three years, can stifle initiatives that could improve core spare capacity on existing driver photocard production
service delivery by undertaking, and learning from, wider equipment with the potential to generate 130,000 of
markets opportunities. Departments that operate a stick to revenue surplus over three years.
the knitting policy discourage bodies and agencies from
submitting wider markets proposals. This results in little or 3.16 Much more effort is required to address all
no wider markets activity. the barriers to wider markets activity. For example
Figure8 overleaf shows the option appraisal diagram,
3.13 Overcoming the many barriers to activity calls for taken from the original Treasury guidance on selling into
a champion with the ear of the Management Board on wider markets, which confronts the would-be project
important issues, if not a full member of that Board. This champion. Although this guidance was not intended to
is consistent with an increasingly professional approach be prescriptive, the accompanying diagram appears to set
to service delivery. The management of any department or out a number of stark choices that lead to the box marked
agency that explores a wider markets opportunity is likely STOP. Apart from the first choice (on legality), before
to trigger a process of cultural change. This will include coming to this conclusion, an appropriate question for at
joining forces with the private sector when appropriate. least one further iteration would be Can the proposed
Those interviewed that have done deals have found such activity be modified to address the problem?
change beneficial learning lessons from both success
and failure. The corporate governance code, recently Asset management, including intellectual
published by the Treasury26 implies that this should be on
property, will need to be taken seriously
the agenda for department Management Boards because
of their responsibility to: 3.17 Following the efficiency and asset management
reports referred to in paragraph 3.3, Finance Directors
lead and oversee the process of change, encouraging
in major departments are giving more priority to asset
innovation, and where appropriate enterprise, to enhance
management. Not all public bodies, however, recognise
the departments capacity to deliver.
that the potentially underutilised assets that they should
manage include intellectual property, know-how and
3.14 Wider markets activity does not take place in
human resources. Our February 2002 examination on
a vacuum. Many projects will find themselves in
commercialising public sector science27 identified a number
competition with private sector businesses. While it is
of alternative ways of generating benefits from intellectual
essential that proper business case review and assessment
property. These are set out in Figure 9 on page27.
takes place, this must be completed in a commercially
25 Delivering the Commercialisation of Public Sector Science, HC 580 Session 2001-2002, paragraph 7 on page 3.
26 Corporate governance in central government departments: Code of good practice, July 2005 close of paragraph 2.1.
27 Delivering the Commercialisation of Public Sector Science, HC 580 2001-2002.

part three
8 Illustrative flowchart for developing a wider markets opportunity
Is the proposed activity of a No

Wider Markets initiative
discretionary and commercial nature? not applicable
Yes
Should the asset be used for No

wider markets?
Yes
Is the proposed wider markets activity No

appropriate and legal?
Yes
No
Is there a market for the good/or service?
Yes STOP
No
Is it financially worthwhile?
Yes
Will public sector budgets, services and No

reputation be protected?
Yes
Yes Is there a need for significant

Is there a need for private sector skills,
investment and/or public
competences or finance?
sector involvement?
No No No
Implement in-house activity Implement simple PPP Implement complex PPP

Develop business case Develop business case Develop business case
Market product services Identify and select partner Identify and select partner
Contracts for sale Agree contracts with partner Develop and agree final business
case with partner
Develop and agree legal and
organisational structure
with partner
Source: HM Treasury

part three
Value given away for non-financial benefits Recording of activities should be consistent
needs to be assessed and more detailed
3.18 During the course of our study the argument was 3.20 Even those departments that are in the lead could
sometimes made for the provision of goods and services, benefit from improved financial information and cost
which could earn wider markets revenue, as a public management. The Ministry of Defence is rolling out a
relations activity. This can take many forms such as give database, developed in one branch of the armed services,
away items or the provision of personnel or equipment at which increases assurance that activities are worthwhile
reduced or no cost. The benefits can include enhanced and helps to focus management attention on those that
recognition of the body and its role, improved public have the most potential.
reputation or additional uptake of its core services.
3.21 During the course of our examination we could
3.19 The private sector also carries out similar public not find reconciled management information on wider
relations activities. An important part of the private sector markets activity, combining revenue cost and performance
approach is measuring the net impact of the public information. While public bodies were able to produce
relations activity.28 In the first instance the provision will information on the revenue earned, many, apart from
be fully costed. New business generated from a public trading funds, have information gaps about the cost of
relations event is tracked to ensure that the additional generating income through some of their other activities.
revenue exceeds the cost. Our study found no evidence This finding is consistent with the findings of other studies
of public bodies conducting similar benchmarking of the conducted by the National Audit Office, such as Income
net outcome of providing goods and services as a public Generated by the Museums and Galleries.29 As a result
relations activity. Without this value for money exercise there can be no calculation of the profitability of wider
the merit of some public relations activity must be open markets activity either as a whole or at departmental level.
to question. Public bodies understanding of their overall business
position lags well behind commercial practice.
and risks
arising from intellectual

9 Opportunities property rights
Intellectual property (IP) rights give rise to a variety of risks and opportunities.
Action Risks Opportunities
Apply for patent(s) Small sunk cost Gain time to develop opportunity
Take out patent(s) Non-refundable costs Exclusivity, build portfolio
Assign intellectual property to spin-out Lack of competition Take research forward with exploitation targets
Sell rights to future intellectual property Little guide to value and may impact on Raises extra funds early
other funders? Vehicle to package IP
Sell an option to buy future Third partys right to re-bid may May secure a better deal from a better
intellectual property inhibit competition placed party
Take equity stake Depends on level/dilution balanced with Sponsor may become a partner
partners strength
Negotiate royalties Licensee may not exploit Undiluted earnings stream
Agree to secrecy Less dissemination and open debate of Protect potential value
the science
Source: Delivering the Commercialisation and Public Sector Science, HC580 Session 2001-2002, 8 February 2002
28 Advertising and Public Relations firms offer these metrics to their clients, often through specialised subsidiaries.
29 See Income Generated by the Museums and Galleries, HC 235 Session 2003-2004: 30 January 2004, Page 3 paragraph 7.

part three
3.22 Public bodies can find it difficult to separate out active public sector organisations from inadvertently
costs already incurred to provide core services, against raising their risk profile in most areas, apart from retaining
specific wider markets activity. For example, deciding an unavoidable level of reputational risk.
the portion (if any) of security costs at a working military
establishment, where a Boxer Tower is also located, Developing capable people calls for adding
that should be charged to the wider markets activity
skills and providing access to expertise
(see Case Example Two). In the early stages of a new
activity, accounting systems lack the granularity to allow 3.25 Partnerships UK has produced with HM Treasury a
a portion of costs to be routinely married to revenues number of best practice guidance documents covering
and enable the contribution of individual activities to a range of commercialisation topics. These guidance
be easily identified. While systems could be changed documents are intended to be non-prescriptive
from the outset, more detailed costing and reporting routemaps through the issues, offering generic
would normally be undertaken as an activity grows, advice and frameworks that can be applied to
generating material revenues. But the discretionary and specific circumstances by all public bodies.
devolved nature of the initiative means that there is no
requirement to consolidate results and report them back 3.26 Civil servants are likely to need help in developing
to departments. These factors have made it difficult for an outline business case for a commercial venture. Most
Partnerships UK and the Treasury to measure the results of all, this involves identifying customers who value a
to date of the Wider Markets Initiative. service above its cost as opposed to matching a need to
a budget. Specialist help is needed and part of the role of
3.23 As a result, the main indicator of wider markets Partnerships UK is to provide guidance (Figure 10) and
performance is a measure of changes in the level of gross help bring it to bear. Training topics and required skills
income received from the private sector. In mid 2005 include customer service, marketing, commercial and
Partnerships UK announced a comprehensive survey of legal awareness, pricing techniques, negotiating skills,
wider markets activities across England and Wales that will project management and finance.
attempt to obtain some of the more detailed information
that is currently only reported by trading funds. Partnerships
UKs experience is that many wider markets opportunities 10 Commercialisation Guidance
are on a small scale and, outside the science sector,30

PUK has produced with HM Treasury a number of best practice
relatively few are large. To date, especially in the context
guidance documents covering a range of commercialisation
of departments overall expenditure, the revenue generated topics. These guidance documents are intended to be
by wider markets projects launched since the start of non-prescriptive route-maps through the issues, offering
the initiative is small, running into low tens of millions. generic advice and frameworks that can be applied to specific
Recognising that hard information is necessary has led circumstances by all public bodies.
Partnerships UK, with the Treasury, from the beginning of n A Guidance Note for Public Sector Bodies forming
2005, to develop the metrics for the first comprehensive Joint Venture
survey of wider markets activity across England and Wales n Generic Business Plan
since the policy was introduced. n Partner Selection document
n Provision of Incentive Schemes
3.24 As a department engages with the initiative and
n Licensing Technology
endorses suitable commercial activities, it will need to
become more of a learning organisation. It will need to n Intellectual Property Management Strategy (to be published
in 2006)
become able to differentiate between classes of risk, and
adjust the controls, possibly changing the organisation n Public Sector Research Establishments Research Councils
UK Best Practice Guidance for Commercial Managers
structure where appropriate.31 In larger projects the public
sector seeks to mobilise new resources from the private n Selling Services into Wider Markets (2002 revision to
HM Treasury guidance)
sector and incidentally to transfer away those risks that
can best be managed by the private sector. While diluting Source: Partnerships UK website
their share of revenues, this approach protects the more
30 Delivering the Commercialisation of Public Sector Science, HC 580 2001-2002 paragraph 21 on page 8 Income of the Medical Research Council grew from
7 million in 1999-2000 to 17.9 million in 2000-01.
31 The Shareholder Executive, was established in September 2003 to promote a professional approach to public sector ownership of business ventures.
Their analysis of the forms of organisation structure available is reproduced as Appendix 5.

part three
3.27 The offer and take-up of formal training met the

original demand, which was not then as extensive as 11 Opportunities for wider markets training
the initiative now potentially warrants. Partnerships
UK organised a two-day induction course run by the There have been a limited number of wider markets
training opportunities.
Civil Service College on two occasions in 2002 and
2004. The course covered the wider markets policy as Month Event
well as an introduction to writing business plans and November 2001 PPP Expo (included wider markets)
marketing. The focus of the course, at a cost of 675,
May 2002 Wider Markets Officers Forum
was very much geared to introducing the policy for those (PUK event)
nominated to be Wider Markets Officers in departments.
October 2002 Wider Markets Officers Forum
In addition Partnerships UK has hosted seminars and (PUK event)
provided conference speakers covering a range of
October 2002 WMI Conference (third party event)
commercialisation topics including exploiting intellectual
October 2003 Wider Markets Forum (third
property, commercial partnerships and routes to funding
party event)
(Figure 11).
March 2004 Wider Markets Officers Forum
(PUK event)
3.28 Relatively few participants in these events have
come from senior management, or from frontline staff. The October 2004 Commercialisation Conference
(PUK/City & Financial)
second Civil Service College course was mainly attended
by Ministry of Defence personnel (who also contributed September 2005 Wider Markets Forum (PUK event)
speakers) and had only one delegate from another
Source: Partnerships UK
department. This course format was discontinued following
mutual agreement. Instead the Ministry of Defence put in
place a series of introductory courses for wider markets
There is scope for greater personal and
practitioners as well as awareness days. The latter events
brought in outside speakers on related topics such as
unit rewards within the existing public
intellectual property rights, licensing and marketing. service framework
3.30 The private sector makes extensive use of incentives
3.29 There is scope to improve on formal training at all levels to reward those who identify opportunities and
arrangements and increase the cross-fertilisation of ideas to motivate those charged with turning the opportunity
that have commercial potential. Partnerships UK, into a commercial reality. The existence of substantial
through its help desk role, provides support to incentives to entrepreneurs forms an important part of
departmental internal seminars and training courses, the appraisal by financial institutions before they lend to,
arranging and speaking at external conferences and other or invest in, new commercial ventures. As a result of the
commercialisation events, and one-to-one meetings with Baker Review incentives have recently been increased
interested departments and other public bodies. The in one area to reward scientific discoveries that have
Ministry of Defence has made efforts to invite Wider commercial applications.33
Markets Officers from other departments to attend or
speak at their training events. There has been take-up 3.31 For ideas that lead to savings, income generation,
from the Driver and Vehicle Licensing Agency, or to better services the Ministry of Defence has an award
HMCourt Service, Customs & Excise32 and the scheme known as GEMS, based on seeking out new
Foreign & Commonwealth Office. ideas (Figure 12 overleaf). This scheme can reward teams
or individuals. Although awards are funded centrally34
it is mainly decentralised and smaller awards can be
made locally by 230 local award groups. According to
the Department, the 22.6 million savings from GEMS
suggestions made last year were unsurpassed by any other
United Kingdom organisation, public or private.
32 Research took place before the merger between HM Customs & Excise and the Inland Revenue.
33 In response to Creating Knowledge Creating Wealth Realising The Economic Potential Of Public Sector Research Establishments, A Report By John Baker
To The Minister For Science And The Financial Secretary To The Treasury, August 1999
34 The GEMS Scheme operates under very favourable tax exemptions agreed with the Inland Revenue. This means that most GEMS awards are paid free of tax,
except those which relate to normal duty, or for awards above 5,000 where the amount above 5,000 is taxed. The Inland Revenue rules also allow the
taxfree payment of encouragement awards up to 50.

part three
12 The Ministry of Defence GEMS Scheme 13 Departmental wider markets roles
The Ministry of Defence has made significant awards to staff. A variety of roles are required to pursue wider markets activity.
GEMS statistics for Generalists Potential specialists

Financial year 2003-04
n Senior Management n Wider markets/
Number of suggestions 2,169 Commercial staff
n Budget/Finance staff
Number of awards 1,437 n Safety/Security specialists
n Line management in the
area concerned n An estates officer
Amount saved 22,642,537
n Intellectual Property lead
Amount awarded 348,599
n Partnerships UK help desk
Source: Ministry of Defence
3.32 In comparison with the private sector, the level of

participation measured by the numbers of ideas received 3.35 A more structured approach could also mean taking
was low, at less than one per cent of staff. The Ministry a pilot project approach to setting up trading subsidiaries
of Defence are looking for all staff, encouraged by their or, when costs or complexity are an issue, identifying a
managers, to increase this into the range from two per cent public or private sector partner with a suitable existing
to three per cent. However a general civil service policy trading entity:
limits cash incentive payments in terms of the salary bill.35 Many of the museums and galleries have brought more
This is not a problem for a large department but could commercial approaches and new skills to their trading
be a severe constraint when applied to a smaller public activities by establishing trading subsidiaries. The ten that
sector bodies, and contrasts with the rewards available have trading subsidiaries see considerable benefits in terms
to public sector scientists. of improved management focus on commercial objectives
and the input of skilled and knowledgeable non-executive
Developing infrastructure, people and systems directors. But concerns about the cost and complexity
can increase activity and help manage risk of managing separate legal entities have prevented other
museums and galleries, particularly smaller ones, from
3.33 For active departments, developing the infrastructure going down this route.37
would include putting in place internal processes and
procedures and structures to facilitate wider markets 3.36 Partnerships UK has found that those departments
activities such as nominating champions in the teams, that have invested effort in establishing and making the
commissioning opportunities audits and putting in place most of their Wider Markets Officers are best able to
some standardised contract for sale processes. There identify and manage wider markets opportunities. At the
is a natural tendency to manage headcount in full time early planning stage, Partnerships UK encourages public
equivalent terms, losing sight of the spare operational bodies to consider the need for audits of opportunities
capacity that undoubtedly exists outside peak periods. (including Intellectual Property audits). This is one way of
The Comptroller & Auditor Generals report on Income establishing potential commercial opportunities and taking
Generated by the Museums and Galleries drew attention inventories of available skills and resources.
to the scope for smaller bodies to pool people resources
and exchange staff.36 3.37 Wider Markets Officers have most impact when
the public body concerned also puts in place systems or
3.34 Undertaking wider markets activity requires that processes covering the business areas of planning, fund
active departments develop suitable roles for specialists raising, performance measurement and networking to share
and generalists (Figure 13). It remains exceptional knowledge and experience. A local body with a potential
for wider markets activity to be considered within deal is made aware of the essential information that identifies
performance appraisals for generalists or for specialists the risks and the rewards of the activity. This may take a
who are not in a full-time commercial role. similar form to the data activity sheet shown in Figure 14.
35 In the past this was 0.2 per cent of the total salary bill, but can now be tailored according to business needs.
36 Page 6, Recommendations, Income Generated by the Museums and Galleries, HC 235 Session 2003-2004: 30 January 2004.
37 Page 4 paragraph 11, Income Generated by the Museums and Galleries, HC 235 Session 2003-2004: 30 January 2004

part three
n a method of reducing the risks of additional investment

of an activity
sheet that
captures

14 Example in people and resources wherever possible;
essential data
n a means of introducing commercial skills and routes
1 Brief description of the activity, including: to market that the public sector body is not likely to
have; and
n Location, deliverables, training, etc
n a means of accelerating the development of
n Recommendation to proceed/managerial sign-off
commercial opportunities and obtaining returns
2 Financial information, including: faster than might be the case if the public body were
n Price information, likely demand, feasibility, lowest
to exploit its assets alone.
acceptable price, etc
3.39 Involving a private sector partner may not be
n Cost of Activity to organisation
appropriate for all wider markets activities. In cases where
n Comments and sign-off by Budget Manager the commercial risks are well known and manageable
and there is no requirement for substantial investment,
3 Contacts (project manager, proposer, supporting
a private sector partnering approach dilutes the public
customer/company)
sector share of the rewards. The Committee of Public
4 Activity information: Accounts in its report on Income Generated by Museums
and Galleries pointed out that such partnership is not as
n Background to activity and idea generation
simple a solution as borrowing:
n Details and objectives of activity
The museums and galleries cannot borrow money freely
n Potential income generation and recurrence of activity
on the financial markets because as non-departmental
n Use of Intellectual Property Rights public bodies they are subject to government controls over
public sector borrowing. Instead most of the museums
5 Impact on Department: and galleries use partnerships with the private sector to
n Impact on core Department activities and output finance their investment in income generating activity.
n Involvement of personnel (numbers, grades, duties in activity) While partnership provides a way to access funds, it can
be difficult to attract suitable partners, can lead to lower
n Resources needed, caveats and permissions from resource/
returns and is more complex than borrowing.38
asset owner
6 Risk considerations, including: The Wider Markets Initiative will benefit from
n Completed Risk Assessment form improved monitoring and knowledge sharing
n Internal risk classification: high/medium/low/very low 3.40 For each of the wider markets activities already
risk activity
described in Figure 2 there is likely, somewhere, to be a
Source: NAO based on a Ministry of Defence Wider Markets Data public body that has already been active for some time.
ActivitySheet The resulting knowledge and experience is not easily and
automatically made available to public bodies that have
just identified an opportunity to get started. There is often
Raising finance on a risk sharing basis may be scope to avoid reinventing the wheel. The Ministry of
required for significant new investment Defence, for example, now has a website and a films
location co-ordinator that brings in a consistent contract
3.38 The Treasury guidance permits some public
approach for letting film locations.
investment in human or physical resources (related to the
wider markets activity) provided that it is marginal and
3.41 As referred to in paragraph 3.23 Partnerships UK has
that all costs are covered by existing budgets. Otherwise
developed a web-based questionnaire that looks at wider
the guidance requires that any substantial new investment
markets activity by volume, type, numbers of people
in a wider markets project should normally be undertaken
involved and financial values generated since 1998. This
by a private sector partner. The involvement of a private
survey has been tested on a number of public bodies and
sector partner is intended to deliver:
was launched at the end of November 2005.
38 PAC 33rd Report: Income generated by the museums and galleries, (HC 430).

appendix one
Appendix 1
Methodology
The key study question is whether the Wider Markets Our examination covered:
Initiative is contributing effectively to the larger drive to
n Whether there is inefficient use of assets in the
more efficient use of public assets. This high level review
public sector; whether the extent of underutilised
has concentrated on the relationships between the Treasury,
assets has been identified or, if not, whether
departments and Partnerships UK (the boxed area in
capturing information about underutilised assets
Figure 15) and whether enough has been done to raise
has been planned;
awareness of potential benefits and to measure outcomes.
n Whether there has been an effective response to the
potential inefficient use of public assets (by central
15 Support for the delivery of the Wider Markets Government and/or by public bodies);
Initiative is outsourced to Partnerships UK
n Whether the Wider Markets Initiative framework is
Partnerships UK provides support for the Wider Markets fit for purpose; whether procedures exist to match
Initiative through a contract with the Treasury. spare capacity to acceptable market opportunities;
whether internal procedures and guidance are
Scope of study suitable; and whether appropriate resources of skills,
time and money are available (avoiding duplication
of effort and/or fixed costs); and
n Whether the outcome of the Wider Markets
Initiative has been satisfactory for the Treasury and
other stakeholders.
Discretionary Guidance Contracted out advisory role To illustrate how the initiative is working, we have
drawn on those public bodies where the assets are held
primarily to deliver statutory services, and which may
offer opportunities for greater use. It is not an examination
of public bodies, such as the Post Office, which are
Support structured to operate commercially.
Departments
Advice
No activity Simple deals Complex deal
Departments keep revenue from variable level

of WMI activity

appendix one
Main aspects of the National Audit Survey of departmental Wider

Offices Methodology Markets Officers
In undertaking this examination we: To determine the effectiveness of the Wider Markets
Initiative, we surveyed the departmental Wider Markets
n Designed the examination using experience
Officers to determine:
acquired on earlier studies of privatisations,
commercialisation of public sector science and n Their responsibilities
departmental monitoring;
n The resources devoted to the initiative
n Reviewed information from the departmental staff,
n The level of activity in their department
advisers and records of a sample of wider markets
proposals and initiatives undertaken; n Future wider markets activities planned
n Met with Wider Markets Officers and Finance n Their view on the success or failure of the initiative,
Directors of selected Government departments; the priority within the department and any lessons
learned from past activities.
n Consulted with HM Treasury and Partnerships UK
and reviewed current opportunities, procedures and
policies across different government departments;
Case Examples
n Interviewed Wider Markets Initiatives
We considered undertaking research at grass roots
partner organisations.
level into the potential take up to the initiative and to
quantify current activity. Our initial planning estimated,
Collection of information given the current lack of centrally held information,
that an examination of this type would require at least
We gathered available information from a number of
6.5 man years of effort. Extrapolating the findings would
sources. There was no departmental data to identify the
not necessarily reveal the untapped potential for wider
number of deals closed under the initiative, the total
markets activity or put a figure on revenues forgone by
revenues earned or the costs incurred. The sources included:
departments not pursuing the Wider Markets Initiative.
n Semi-structured interviews with Partnerships UK and
HM Treasury; Instead we drew a number of case examples from our
work in order to illustrate higher level points made in the
n Structured interviews with identified departmental
study. We selected cases to provide a range of examples
Wider Markets Officers and advisors;
across government, with different types of activities, risk
n Review of experiences from Wider Markets Initiative profiles and potential outcomes. This diversity has been
partner organisations; illustrated by using the Ansoff matrix (Figure 16 overleaf)
The examples were based on semi-structured interviews
n Survey of departmental Wider Markets Officers;
to capture the views of those involved on facets of wider
n Review of case examples, literature and internet markets activity, such as the barriers to the initiative and
searches relevant to the topic. drivers of success. In one case, we constructed an analysis
of the options open to the Ministry of Defence to quantify

appendix one
the financial impact of the Wider Markets option chosen The matrix is used to review the range of products/services
for the Boxer Towers. The analysis examined a series of that a company sells, as well as to help plan the future
potential scenarios available to the Ministry of Defence product range by offering four strategic options:
using a range of imputs which give a conservative view of
n Option 1: market penetration, which involves
the saving made. It would not have been practical for us to
increasing the sales of existing products in existing
construct an analysis of all Wider Markets projects in part
markets. This is often regarded as the least risky
due to lack of data.
strategy because the business is familiar with both
its customer base and its market. However, as the
Professor H Igor Ansoff first published his growth vector
market changes and develops there may not be long-
matrix or product-market matrix in the Harvard Business
term growth potential in pursuing this strategy;
Review in the Sept/Oct edition of 1957. It has become one
of the principal tools of analysis used in the formulation of n Option 2: product development, which involves
business and marketing strategy. introducing new products to existing markets. With
this strategy the business has an understanding of its
current customers but is taking a measured risk due
16 Different risk profiles of wider market activity to the unfamiliarity of the new products;
n Option 3: market development, which will allow
The risk associated with a new business activity increases with
its novelty. Dealing with existing customers and products is the business to find new markets for existing
lower risk. Dealing with either new products or new customers products. The business has a familiarity with its
increases the risk, while attempting both at the same time current product, which reduces risk, but is looking
has the highest risk. The diagram shows the spread of wider at a new market, which introduces a degree of
markets activity.
uncertainty; and,
n Option 4: diversification. This is the most risky of
New Medium Risk Higher Risk
Market
the four options, introducing new products into new
n Probate online n Watergrid markets with no knowledge of either the product
n Boxer towers or the market. This option is pursued when a fully
developed business case shows a satisfactory
n RAF
merchandising prospect of high returns.
Market development Diversification
Existing Lower Risk Medium Risk

Seeking views of interested parties
Market In addition to Partnerships UK and the departments
n Waterside inns n CEFAS
Technology most concerned, we consulted various bodies and
n Flagship training individuals connected to Public Private Partnerships and
n Army Training
Shoe
Wider Markets activities during the course of our work.
These included:
Market penetration Product development
n Members of the Lyons Review team;
n Andrew Stamp (Morgan Harris Burrows); and
Existing Product New Product
n Christina McComb (Shareholder Executive).

appendix two
Appendix 2
Departmental Assets
Government Departments Fixed Assets Summary
Fixed Assets held as at 31st March 2004
Departments Tangible Fixed Intangible Fixed Investments Total Fixed

Assets Assets Assets
000 000 000 000
More than 10,000m
Ministry of Defence 66,737,257 20,186,743 420,838 87,344,838
Department for Transport 70,629,135 68,113 569,805 71,267,053
Department of Health 5,370,833 54,251 18,561,601 23,986,685
From 1,000m to 10,000m
Home Office 6,347,903 37,077 37,241 6,422,221
Department of Trade and Industry 147,314 747 4,030,209 4,178,270
Department for Constitutional Affairs 1,732,515 _ 987,942 2,720,457
Less than 1,000m
Department for International Development 70,290 550 1,751,249 1,822,089
HM Treasury 123,023 1,934 1,585,370 1,710,327
Foreign and Commonwealth Office 1,227,362 1,032 _ 1,228,394
Department for Environment, Food and Rural Affairs 741,239 12,874 15,665 769,778
Department for Work and Pensions 599,663 589 600,252
Inland Revenue 555,500 555,500
Cabinet Office 255,351 2,073 479 257,903
HM Customs and Excise 245,511 7,247 252,758
Office of the Deputy Prime Minister 144,242 361 46,591 191,194
Department for Education and Skills1 80,493 1,417 81,910
Department for Culture, Media and Sport 67,402 158 67,560
Total 155,075,033 20,374,577 28,007,579 203,457,189
Source: Departmental Resource Accounts
NOTE
1 The DfES Resource Accounts 03-04 also list 10,905 million of loans as part of Fixed Assets, which are mainly related to student loans. We have not
included these in this asset list as we believe they are a single material item that does not have any Wider Markets potential.

appendix two
Government Departments Employees Summary
Average number of whole-time equivalent persons employed during the year ended on
the 31st March 2004
Departments Average numbers
More than 15,000
Ministry of Defence 306,320
Department of Health 195,410
Department for Work and Pensions 134,318
Home Office 88,398
Inland Revenue 77,480
HM Customs and Excise 23,302
Foreign and Commonwealth Office 15,651
From 5,000 to 15,000
Department for Constitutional Affairs 14,831
Department for Environment, Food and Rural Affairs 14,466
Department for Transport 11,499
Department of Trade and Industry 8,626
Office of the Deputy Prime Minister 6,816
Less than 5,000
Department for Education and Skills 4,931
Department for International Development 2,876
Cabinet Office 2,434
HM Treasury 1,730
Department for Culture, Media and Sport 753
Total 909,841
Source: Departmental Resource Accounts

appendix three
Appendix 3
Partnerships UK
1 Partnerships UK is a Public Private Partnership 2 Partnerships UK offers a blend of public and private
(Figure 17) which has a unique public sector mission. Its sector commercial expertise combined with hands-on
core purpose is: experience in the development and delivery of numerous
Private Finance Initiative (PFI) and other Public Private
to support and accelerate the delivery of infrastructure
Partnership (PPP) projects.
renewal, high quality public services and the efficient use
of public assets through better and stronger partnerships
3 To support public bodies implement wider markets
between the public and private sectors.
activities, a Wider Markets Unit and Science and
Technology Commercialisation Unit were established in
17 Partnerships UK Shareholder List Partnerships UK in 2000. The Units were funded by the
Treasury to allow support to be available free of charge
Partnerships UK (PUK), launched in 1999 out of HM Treasury for public sector bodies. In 2003 the units were merged
Task Force and funded in 2000 and 2001, is a joint venture, to form a single Commercialisation Team which provides
with a majority stake held by the private sector. support across wider markets and science and technology
commercialisation, through a range of services including:
Company %
n A help desk to respond to general queries;
HM Treasury 44.6
n Project specific support;
Uberior Infrastructure Investments Limited 8.8
n A service to review Wider Markets projects to assist
The Prudential Assurance Company Ltd 8.8
in their development and sign-off; and
Abbey National Treasury Services plc 6.7
n Guidance material and online pro-forma.
Sun Life Assurance Society plc 6.7
Barclays Industrial Investments Ltd 6.1 4 Partnerships UK receives funding from the
The Royal Bank of Scotland plc 6.1 Treasury to cover a number of activities. In 2005-06
the Treasury and the Office of Science and Technology
The Scottish Ministers 4.4
provided around 240 thousand of ringfenced support
Serco Ltd 3.3 for Wider Markets and other science and technology
GSL Joint Ventures Limited 2.2 commercialisation activities.
Boldswitch Ltd (The British Land Company) 2.2
Source: Partnerships UK website

appendix four
Appendix 4
Resource Accounting
Introduction Benefits of Resource Accounting

Resource Accounting was announced through a White Budgeting in resource terms offers benefits at both the
Paper in 1995: Better Accounting for the Taxpayers micro and the macro level. At a macro level it delivers:
Money (Cm 2929). The Government conducted the
n a clearer view of the real costs of providing
2000 Spending Review on a resource basis and 2001-02
individual services, which takes account of the full
estimates were presented to Parliament on a resource basis.
costs of holding assets;
Departments produced resource accounts from the year
1999-2000. n a more accurate figure for the cost of depreciation in
central government;
Under the previous budgeting system, public spending
n a more transparent split of capital and current
was generally planned and controlled in cash terms. Cash
spending, with public corporations investment
payments and receipts scored in the year they were made or
presented more clearly;
received. It was not a pure cash system because it included
some non-cash items in departmental controls like credit n a better measure of the total value of central
approvals for local authorities, and depreciation at an government assets, building on what has already
aggregate level. But generally, what counted was cash. been achieved through the National Asset Register.
Under resource accounting what counts is when the At the micro level, resource budgeting offers:
resources are consumed, not when they are paid for. n better incentives to manage assets and dispose of
Spending is scored as it is incurred, and income as it is those no longer needed, and better incentives in
earned. So resource accounts include costs such as stocks planning investment, as this affects the cost of
consumed (rather than bought and sold), provisions to capital charge;
meet future payments, and the cost of using capital assets
(depreciation and a cost of capital charge). Payment made n new incentives to manage working capital (debtors,
in advance of future consumption does not score. creditors and stocks); and
n a clearer distinction between loans and grants.

appendix five
Appendix 5
Publicly Owned Business Framework
Legal Form Any lending to the PC, either Voted lending from the
department or loans from the National Loans Fund, score
There are four main frameworks in use in the public sector in the parent departments Capital DEL. Therefore, capital
commercial activity: borrowed by the PC is seen as funding provided by the
parent department, which is then unavailable for other
Companies Act Companies uses. As such, the PC must compete with other vote-
These companies have the same standard formal funded projects for any funding that is required, regardless
governance framework as private sector companies and of the financial return.
are required to report to the same standards.
Self-Financing Public Corporations
Statutory Corporations Some PCs are designated as Self-Financing Public
These corporations are formed under specific legislation Corporations (SFPC). SFPCs must normally trade
which, in the main, replicates the Companies Act. profitably without subsidies, mainly with non government
customers, and must not perform regulatory functions.
Status as an SFPC is determined by the Chief Secretary
Limited Liability Partnerships
to the Treasury on a case-by-case basis. In contrast to a
LLPs share many of the features of a normal partnership, but PC, an SFPC will score in Annually Managed Expenditure
offer reduced personal responsibility for business debts. (AME) and is therefore more easily managed by the
parent department. While HM Treasury may require a
Trading Funds contribution from the parent departments DEL for any
underperformance from the SPFC, this contribution is
These are executive agencies of government that, under usually substantially less than the actual loss recorded by
the Trading Funds Act 1973, are allowed to net off their the SFPC and is often capped. Any over performance does
revenues and costs. not lead to a DEL credit for the parent department.
Impact on Departmental Resources Borrowing Regime

Government-owned businesses classified by the Office For both PCs and SFPCs, the principles of Government
of National Statistics as public corporations can have an Accounting on commercial borrowing are the same.
impact on the budgets of their parent departments in one Other than for very short-term borrowing (i.e. overdrafts),
of two ways. government should provide all the external financing
for government-owned businesses, and the businesses
Public Corporations should not borrow from the private sector. This is because,
unless the private sector debt provider is bearing any
For most PCs, HM Treasury operates a budgeting
genuine risk (i.e. that the business will default on the
arrangement whereby departments are required to obtain
loan), such lending would not offer value for money for
a dividend from their PC to match a cost of capital
the government, as the government is able to borrow
charge in their Departmental Expenditure Limit (DEL).
more cheaply than the individual business. However, the
Any shortfall in performance by a PC, manifested by
principles also state that the businesses themselves must
a reduction in dividend from the PC, must be covered
be charged at a market rate, to ensure that they do not
from the parent departments Resource DEL, which
get any commercial advantage from the ability to borrow
has a consequent impact on the funds available to the
at below market rate. The rate of borrowing is set by
department. The parent department may retain dividends
reference to the market conditions and risk of the sector.
recovered in excess of the cost of capital charge.

The Wider Markets Initiative: Report by The Comptroller and Auditor General

Uploaded by

Copyright:

Available Formats

The Wider Markets Initiative: Report by The Comptroller and Auditor General

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

The Wider Markets Initiative: Report by The Comptroller and Auditor General

Uploaded by

Copyright:

Available Formats

The Wider Markets Initiative

This report can be found on the National

For further information about the

The public sector can do more 24 4 Resource Accounting 38

Re-energising the Wider Markets Initiative 24

the Wider Markets initiative 

Scope of the report 9 Interviews with Finance Directors showed that,

10 Following the Lyons review of public sector asset

 the Wider Markets initiative

14 A businesslike approach to such opportunities would

the Wider Markets initiative 

On identifying underutilised assets On promoting ideas with

 the Wider Markets initiative

10 Partnerships UK should build on the training which it

the Wider Markets initiative 

 the Wider Markets initiative

the Wider Markets initiative 

To deter waste, there is a capital charge on

Guidance has helped encourage wider

10 The Fees and Charges Guide, last published in 1992.

 the Wider Markets initiative

n TV and film opportunities: sites, extras, video footage, etc

1.11 When undertaking wider markets activity public n Licensing of IT applications

n Sale of anonymised data

the Wider Markets initiative 

1.14 The Army has taken a wider ranging approach to the

1.16 The opportunity to earn additional revenue is

10 the Wider Markets initiative

cASE ExAMPLE OnE

Since 1858 wills subject to probate have been registered with

The information is currently held in 1,013 folio bound volumes

The Probate Service examined the demand for a digital version

The Probate Service aims to make the indexes available on-line,

The Probate Service retains the intellectual property rights in

THE WIDER MARkETS INITIATIvE 

12 the Wider Markets initiative

the Wider Markets initiative 13

Over 10,000 million DfT MoD*

1,000 10,000 million HM Treasury DTI Home Office

Less than 1,000 million DCMS* DEFRA DWP

DfES1 ODPM HMRC

Source: National Audit Office

14 the Wider Markets initiative

2.7 Energetic Wider Markets Officers in public bodies

40 2.8 There is also little continuity in post only one third

Source: National Audit Office

6 Typical quotes from Wider Markets Officer survey replies

Exploitation of wider markets has not

the Wider Markets initiative 15

It is unlikely that the 77 per cent of Wider Markets Officers

Where specific factors apply there have been

6 THE WIDER MARkETS INITIATIvE

The Centre for Environment Fisheries and Aquaculture

When present, management commitment has

THE WIDER MARkETS INITIATIvE 7

2.15 Where civil servants engage in commercial activities

The Ministry of Defence has to ensure that any wider markets

 THE WIDER MARkETS INITIATIvE

the Wider Markets initiative

the Wider Markets initiative

the Wider Markets initiative

the Wider Markets initiative

the Wider Markets initiative

the Wider Markets initiative

the Wider Markets initiative

the Wider Markets initiative

the Wider Markets initiative

THE WIDER MARkETS INITIATIvE

6 THE WIDER MARkETS INITIATIvE

THE WIDER MARkETS INITIATIvE 7

THE WIDER MARkETS INITIATIvE

THE WIDER MARkETS INITIATIvE 2