It does not make sense for the Department for Business, Innovation and Skills to spread its policy teams across 14 sites, the department's permanent secretary Martin Donnelly has said, as MPs again quizzed him on the planned closure of BIS's Sheffield site.
Local MPs and unions have expressed concern after BIS announced that it intended to close its Sheffield site – which employs some 250 staff working on policy and corporate functions – in favour of centralising the department's policy team in London. The proposal comes as the department seeks £350m of savings from its day-to-day running costs over the course of the current parliament.
The Public Accounts Committee, which has repeatedly questioned Donnelly on the plans and has pressed for more information on the business case underpinning the decision, used a session this week to try and dig into the detail of the planned move.
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Martin Donnelly: BIS Sheffield closure could save more than £14m
Donnelly wrote to the committee last week, providing a breakdown of figures and putting the "maximum permanent savings" achievable by the Sheffield closure at more than £14.5m "if the office is closed and no staff replaced".
And, at this week's hearing, the BIS perm sec argued that the move would also have "non-monetary" benefits for the policymaking process.
"On the inefficiency side, it is not helpful to try to do policy work on 14 sites, which is what we do at the moment," he said.
"Sheffield is the second largest site, with about 10% [of BIS's policy staff] after London, but then there's a whole range of other sites as well. And this makes it more difficult for us to do an effective and flexible job."
He added: "There is also the question of how we get the best benefit from our teams working together. There is quite a lot of evidence which shows that when you put people together you get more creativity and innovation. You can manage them better. This produces non-monetary outputs – but they're very important in terms of the quality of work that we do. And that is what we are seeking to achieve because we need to be smaller, and more flexible and effective."
Donnelly said the move to London was needed because the department had to work "closely with ministers, with parliament, with the centre of Whitehall" and said BIS intended to move civil servants "around more and more between functions", something that would be harder to achieve in sites dedicated to just one function.
But PAC chair Meg Hillier wondered aloud what was "so different" about BIS compared to other departments, and she questioned BIS minister Anna Soubry's claim during an urgent question in the Commons that she was "confident" that many of the Sheffield staff would choose to make the move to London.
Hillier asked the perm sec: "Seriously are you telling us [...] that many of the workers will choose to take new jobs down in London? Unless you're offering a very generous relocation package I can't see how that's practically feasible."
Donnelly said it was "difficult" to comment on precise relocation figures while a consultation on the future of the Sheffield staff was ongoing, but he acknowledged that the cost of living in London was higher than in Sheffield and said the department was also looking to slash policy posts in the capital.
He added: "There's also the fact that over time, we will be reducing the number of policy posts in London as well. We need people to work differently. We need them to be more skilled and more flexible. So the numbers of policy jobs will decline in London. And that means that there will be, if we go ahead with this process, over time a significant reduction in the posts that permanently transfer.
"But we do not have figures on that yet. Because it depends of the needs of the individual business areas, which we're working through."
Donnelly pointed out that the department had been asked to make operating cost savings of 30-40%, and said this was "going to produce some broadly similar reduction in headcount over time". "The challenge is to do that without losing effectiveness on delivery," he added.
"Absolutist"
But Conservative MP David Mowat said BIS's rationale for the Sheffield move did not "smell right" to him.
Mowat told Donnelly that while he had "no problem" with BIS seeking to shear £350m from its running costs, he believed the department risked being "absolutist" in reducing its national policy footprint.
And he urged the BIS perm sec to take note of a three-hour Commons debate scheduled for May 9 in which MPs will urge the National Audit Office spending watchdog to look into the case behind department's plans.
"These are very difficult issues and I don't forget or underestimate the personal challenge and the problems that this sort of change programme poses" - BIS perm sec Martin Donnelly
Donnelly – whose executive committee will make a formal decision in May on whether to leave the Sheffield site – said the department's was "open to discussing these issues", including with trade unions.
"These are very difficult issues and I don't forget or underestimate the personal challenge and the problems that this sort of change programme poses," he said. "And I'm committed, as are all of us, on the team to working through those effectivelly and supportively with people involved."
The BIS perm sec's latest parliamentary grilling on the Sheffield closure came as the Public and Commercial Services (PCS) union opened a ballot of its BIS members on taking industrial action over the plan.
Ahead of Donnelly's appearance, PCS general secretary Mark Serwotka said: “The business department can no longer conceal from MPs and staff vital information about plans that would mean the loss of 250 skilled jobs.
“Senior officials and ministers must come clean and acknowledge this flies in the face of all their northern powerhouse rhetoric and requires a major rethink, with full consultation and negotiation.”