It’s been a struggle to move civil servants out of London – and relocations have barely touched the central departments. As Stuart Watson discovers, the government now wants to disperse core Whitehall functions.
The chancellor’s Budget last month gave new energy to the civil service relocation agenda, when Alistair Darling published a report calling for a renewed and radical wave of civil service relocations out of the expensive capital. He promised that 15,000 more posts would be relocated within five years, and that in the longer term civil service numbers in London would fall by a third. The programme is set to begin with the relocation of 1,000 Ministry of Justice posts.
The Chancellor’s figures were taken a from a review by Ian Smith, former chief executive of media group Reed Elsevier, which was published alongside the Budget. The report, entitled ‘Relocation: transforming where and how government works’, argues that savings of £1.1bn are possible over 10 years. It has been accepted in full by the government, which has pledged to implement its recommendations.
There is nothing novel in politicians’ desire to move civil service jobs away from London to less expensive locations in the regions. David Werran, chief executive of public property consultancy Governetz and a former civil servant who has organised relocations for 30 years, says that a first wave took place in the 1940s, when 25,000 civil servants were evacuated from the blitzed capital; after the war, their return was discouraged.
Another round began under the Wilson administration in the 1960s. The Thatcher government also managed a major exodus in the late 1980s, when relocations included the Department of Health moving to Leeds, the Inland Revenue to Nottingham, and the Health and Safety Executive to Merseyside.
The most recent round of dispersals was kicked off by Sir Michael Lyons’ 2004 review, which has precipitated the relocation of more than 20,000 civil service posts. Smith’s review aims to go further, reducing the size of the civil service’s 1.7m square-metre central London estate by as much as a third and moving departmental policymakers outside the capital.
Smith’s report praises Lyons for instigating a major behavioural change in the way government views its location, creating an expectation that “organisations have to justify their presence in London on the grounds of business need” – and there is plenty of evidence of movement. The 2009 Budget further increased Lyons’ 2004 target of relocating 20,000 jobs by March 2010, upping the figure to 24,000; and while the latest Office of Government Commerce figures – from December 2009 – reveal that 21,541 jobs have so far left the capital and South East, Smith’s report predicts that when the March 2010 figures are in, they’ll reveal that the raised target has been met. While total civil service numbers rose by two per cent between 2003 and 2009, there was a fall of seven per cent in the number in London, and nine per cent in the rest of the South East.
If the next general election goes against Labour, the Conservatives look set to continue with the relocation agenda. However, shadow Cabinet Office minister Francis Maude is not convinced that progress so far has been as significant as the government claims: “The Labour government have promised much on efficiency, but have repeatedly failed to deliver. This is yet another initiative which they have not followed through on, failing to implement recommendations on relocation made five years ago,” he says in a statement. “Labour Ministers are stuck in a ‘Zone 1’ mindset. The Conservatives would reduce the crippling high costs of rent paid in central London and move civil servants to lower-cost alternatives elsewhere wherever possible.”
Maude did not respond to questions about why he believes the government has failed to deliver on the relocation agenda, or about whether the Tories would implement the Smith review. But James Grierson, head of public sector at property consultants DTZ, is willing to offer a critique of the progress made against the Lyons targets: “The numbers are open to interpretation,” he argues. “Lyons has been about moving posts, not moving people; and when you consider that the civil service has grown over the period generally, you have to ask: how much of that figure is attributable to Lyons? He wasn’t talking about a job-creation scheme for the civil service in the regions. It was about moving civil servants out of London.”
While Smith’s report praises the impact of the Lyons review, it admits that “nearly all” of the jobs moved under the current programme were either operational or in corporate services, with little movement of the main policy functions of departments. “Left to themselves, civil servants would locate in central London. The London magnet is incredibly strong,” says Smith.
His review identifies the chief factors behind this effect, including the historic location of government in Westminster and Whitehall; the need for ministers – and, consequently, their private offices – to be close to Parliament; the greater career opportunities that are perceived to exist in London; and concerns over the business disruption caused by moving large numbers of jobs.
Smith argues that this effect must be overcome if significant savings are to be made. Of the 89,390 civil servants working in London, 60,000 are located within five central London postcodes where the accommodation costs are around twice the national average. “Lyons took the South East as the enemy and, while I think Lyons has been successful, the game is in central London now,” Smith told Civil Service World.
This has led to a change of emphasis in Smith’s review. He believes that there are few executive agency and arms-length body headquarters left in the South East, outside areas that are in need of regeneration; the pressure now, he believes, should be on central departments to present a case why they should remain in London. And if they do need to be near the capital, he believes, they could relocate to outlying areas such as the Thames Gateway. Such moves would not contribute to the overall target for relocations out of London and the South East, but would save money and bring regeneration benefits.
Relocation outside the South East is still the preferred option, however. While Smith says that he hopes that some funding for the up-front costs of relocation will be provided by the Treasury, he argues that this should go only to departments relocating outside the South East. He recommends the creation of efficient “clusters” of government activity in the regions, in locations to be identified by regional forums under the guidance of regional ministers.
Smith calls for new mechanisms to drive this change. He recommends that departments should be held to account for their location decisions by the Chief Secretary to the Treasury and a cabinet committee. The costs and benefits of relocation should be taken into account in the next departmental spending review, and targets set for moving posts out of London. He supports the requirement for departments to have to justify their presence in London when their leases come up for renewal, but adds that government property should be treated as a single campus to encourage further efficiency in the use of office space. He also recommends that departments’ location strategies should be made public. However, he avoids setting individual departmental targets for their share of the total 15,000 relocations; his report was written in three months, and he writes that “in the short time available, I did not think it sensible to ask departments to take such fundamental business decisions.”
The review recognises that the initial costs necessary to provide long-term savings are high. Smith argues that, in order to make the financial benefits of relocation more compelling, the government needs good management of redundancy liabilities; a better alignment between civil service and market pay to more closely reflect the regional pay differentials in the private sector; and the use of relocation as a catalyst for change to produce business transformation. Such wide-reaching change will be difficult to achieve, but it will be necessary if the ambitious targets set out in the Smith review are to be met.
Case study: the Office for National Statistics goes west
Since 2005 the ONS has reduced its presence in London from 900 to 100 people, and by March 2011 only a skeleton staff of about 20 will remain in the capital. The department will meet its Lyons review target of transferring 600 posts to locations outside London and the South East by moving jobs to its office in Newport, South Wales. Further posts have been moved out of London to another existing facility at Titchfield near Southampton, but have remained within the South East.
Dennis Roberts, the director at ONS responsible for the relocation process, explains that the department’s original intention was to transfer posts from London – where ONS had two offices, in Pimlico and Islington – and from Titchfield to Newport, but it was soon realised that this made little sense in terms of cost savings or economic impact: “Titchfield is quite a deprived part of the South East,” he argues. Instead posts were transferred from London to both Hampshire and Wales.
Roberts identifies recruitment as one of the chief challenges resulting from the move. Only around 15 per cent of the department’s London staff chose to relocate. “We were recruiting on a scale we hadn’t done previously,” he says. “If we hadn’t [already] had sites outside London, we couldn’t have moved all our staff out of London. We had established statisticians in Newport and Titchfield, and even if we lost some expertise we could build on that.”
An upgrade to flat-screen monitors coincided with the relocation, and freed up space in existing offices by reducing the area needed per desk, so that staff could be accommodated within existing property outside London. Disposing of unused space in London has proved more difficult, however. It was intended that the Pimlico office at Drummond Gate, where the lease is not due to expire until 2018, should be sub-let to a single occupier, but following the economic downturn, that proved impractical. The office is now being let floor-by-floor, with 60 per cent occupied so far, but Roberts claims that the ONS is still on course to save £5.5m a year in rent and rates by closing its two London offices.
Most of the up-front costs of relocation had to be funded from the ONS’s existing budget, and Roberts says that it was necessary to conduct the programme over several years in order to spread the cost. He adds that the department found it very important to appoint the senior manager in each department at the new location so that they could be on hand to plan recruitment. Making sure that the offices were prepared to receive people also allowed posts to be transferred without losing continuity of service.
The Gambling Commission
In 2005, the Gambling Act created the Gambling Commission, a new non-departmental public body charged with regulating commercial gaming in Britain. As one of the first new bodies to be created following the Lyons report, the commission was required to locate outside London.
The commission moved into its new HQ in central Birmingham in June 2006. Today 170 of the commission’s 220 civil servants are based there, at an accommodation cost less than that paid by its predecessor, the Gaming Board, to house 35 staff at its old home in Holborn. The cost per person is £4,500, compared with a government average of £7,400.
Chief executive Jenny Williams, who took over when the commission was created, says that the choice of location was dictated by the organisation’s need to be accessible from all parts of the UK. It was decided that it must be no more than 10 minutes’ walk from a mainline station that is no more than two hours’ train journey from London.
Six locations were considered, including Bristol and Leicester, but Birmingham won the day thanks to its skills base. “You look at the potential for recruitment, and it is a big legal and commercial centre with strong professional clusters, so you can bring in specialists when needed,” says Williams. Only five of the Gaming Board’s staff relocated to Birmingham; all of its civil servants were on secondment, and therefore had home departments to which they could return.
The commission took a newly-refurbished building on Victoria Square, with a modern interior (see below) hidden behind a Victorian facade, on a 10-year lease. “Starting from scratch with a new building means you can have a good design and good furniture, and that’s helpful in recruitment,” says Williams. The commission wanted to recruit staff that reflected the ethnic diversity of Birmingham’s population, and were provided with assistance by the City Council to do so.
Williams says that they encountered reluctance among potential recruits already working for the civil service, who balked at taking short-term contracts. She suggests that in London civil servants involved in policy work are more willing to sign up to contracts of two or three years because they see more opportunities to move to another department. However, she adds that this difficulty is fading as a more substantial civil service “cluster” develops in Birmingham.
On the other hand, she adds, starting afresh means that you can change working practices for the better: “You can design for modern styles of working, which makes a huge difference, and it’s much easier to reduce your carbon footprint,” she says.