Opinion: Why relocating civil servants out of Whitehall doesn’t boost regional growth

Written by Paul Swinney on 16 August 2017 in Opinion
Opinion

If Whitehall pushes ahead with plans to move civil servants around the country, it must conduct proper impact evaluations

Even the high profile relocation of some BBC functions to Greater Manchester has been less successful than anticipated. Credit: Martin Rickett/ PA Images

Moving public sector jobs out of London to stimulate growth elsewhere in the country is back on the political agenda. This year’s Conservative Party election manifesto committed to move more civil servants out of the capital, while Cabinet Office minister Chris Skidmore has told Civil Service World that the over 20 new public bodies set to be opened because of Brexit are likely to be located outside of London

But, beyond the immediate jobs they bring, what economic impact do these kinds of relocations have? Our research suggests we should be very wary of overestimating the benefits.

The policy is nothing new: HMRC has offices in Liverpool, the Department for Business, Energy and Industrial Strategy in Sheffield and the Department for Work and Pensions in Newcastle. But these departments have been criticised in the past for moving back-office functions north, while high-paid functions remain in London – which accounted for 23% of all of England’s civil service jobs in 2016, but 53% of top grades.


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Our research looked at two examples of higher-skilled functions moving out of London: the consolidation of the Office for National Statistics in Newport and the relocation of some BBC functions to Greater Manchester. In both cases, the relocations were intended to give an economic boost to their host cities. But our research shows that the impact has been limited

The ONS employs a lot of people at its Newport site, but its multiplier effects – the number of indirect jobs it has generated – look minimal. Its out-of-town location and the (rightly) closed nature of its work do little to generate demand for lunchtime retail trips, afternoon external meetings or after-work drinks. And this says nothing of the impact of the relocation on the output of the ONS itself, which the Bean Review suggests was negative.
 
The BBC move was particularly high profile. Original estimates suggested it would create 15,000 jobs directly and indirectly in the region. Five years on, our analysis suggests that the numbers are much smaller than that. A total of 4,600 jobs were created on the MediaCity site – but put aside the BBC jobs that moved with the relocation and the 1,200 that moved from elsewhere in Greater Manchester and there’s a maximum of just 1,400 jobs created in media as a result of the move. Meanwhile, any wider impacts on supporting industries, such as hotels or retail, appear to have been very small.

There are other, non-economic, reasons to move public sector jobs out of London, such as raising a city’s profile, enhancing devolution or making public bodies more representative of the UK. These are all noble and worthwhile goals. But we should be clear about our ambitions, rather than creating unrealistic economic development targets.

Lessons for Whitehall

As the government moves forward with its commitment to place civil servants and public bodies out of London, it needs to bear several things in mind. 

First, in terms of spurring significant growth in other sectors, the success of relocation projects depends on the characteristics of a host city. Ultimately, growth will only occur in a place that already has a large share of highly skilled workers and a diverse economy.

Second, relocating public sector jobs is unlikely to do much to tackle the fundamental challenges facing the cities where growth has been stalling over the past four decades. A couple of thousand extra jobs is always welcome, but the real focus should be on creating the conditions to attract thousands of private sector businesses, in a range of sectors, which will in turn bring tens of thousands of additional jobs. 

A lack of skills, poor transport links and the absence of devolved power are often the main barriers to attracting new businesses. While it may seem glamorous, for example, for a city to bid to become the new home of Channel 4, it may be that resources would be better spent addressing more fundamental challenges.

Third, if the government is to move public sector bodies out of London, it should be clear about its reasons for doing so, and set up a proper evaluation of the move. Imagine a scientist conducting an experiment but not bothering to measure the results. It might sound like madness, but this is too frequently the norm for economic development.

There are evaluation tools that exist for evaluating local growth schemes, such as those developed by Henry Overman, the director of the What Works Centre for Local Economic Growth, which include ensuring that evaluation is considered before a project starts, having a baseline and a control group against which to measure change, and focusing on just the most crucial outcomes. Making the most of future public sector relocations will depend on getting better at this evaluation.

About the author

Paul Swinney is principal economist of the think tank Centre for Cities and tweets as @Paul_Swinney

 

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