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Relocation, relocation, relocation: Assessing the casefor public sector dispersalJ. N. Marshall a , D. Bradley b , C. Hodgson c , N. Alderman d & R. Richardson ea Centre for Urban and Regional Development Studies , University of Newcastle ,Claremont Bridge, Newcastle upon Tyne, NE1 7RU, UK E-mail:b Centre for Urban and Regional Development Studies , University of Newcastle ,Claremont Bridge, Newcastle upon Tyne, NE1 7RU, UK E-mail:c Centre for Urban and Regional Development Studies , University of Newcastle ,Claremont Bridge, Newcastle upon Tyne, NE1 7RU, UK E-mail:d Centre for Urban and Regional Development Studies , University of Newcastle ,Claremont Bridge, Newcastle upon Tyne, NE1 7RU, UK E-mail:e Centre for Urban and Regional Development Studies , University of Newcastle ,Claremont Bridge, Newcastle upon Tyne, NE1 7RU, UK E-mail:Published online: 18 Aug 2010.

To cite this article: J. N. Marshall , D. Bradley , C. Hodgson , N. Alderman & R. Richardson (2005) Relocation,relocation, relocation: Assessing the case for public sector dispersal, Regional Studies, 39:6, 767-787, DOI:10.1080/00343400500213663

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Regional Studies, Vol. 39.6, pp. 767–787, August 2005

Relocation, Relocation, Relocation: Assessingthe Case for Public Sector Dispersal

J. N. MARSHALL, D. BRADLEY, C. HODGSON, N. ALDERMAN andR. RICHARDSON

Centre for Urban and Regional Development Studies, Claremont Bridge, University of Newcastle, Newcastle upon TyneNE1 7RU, UK. Emails: j.n.marshall@newcastle.ac.uk, d.p.bradley@newcastle.ac.uk, c.m.hodgson@newcastle.ac.uk,

neil.alderman@newcastle.ac.uk and ranald.richardson@newcastle.ac.uk

(Received October 2003: in revised form August 2004)

M J. N., B D., H C., A N. and R R. (2005) Relocation, relocation,relocation: assessing the case for public sector dispersal, Regional Studies 39, 767–787. The paper assesses the case for publicsector relocation from capital cities using evidence from Britain. The senior echelons of the British civil service aredisproportionately concentrated in London. Significant reductions in operating costs can be achieved by relocating civil servicefunctions from the capital, and these financial savings have been used to justify programmes of dispersal. However, the paperstresses the strong regional case for relocation; relocation contributes directly through employment creation to more balancedregional economic development and simultaneously reduces overheating close to the capital and the under-utilization ofinfrastructure and human resources in other regions. The relocation of more senior jobs in the civil service from Londonstrengthens the service base within problem regions. The highly centralized and strongly hierarchical nature of the civil service,combined with the buoyancy of the private sector near the capital, acts as a brake on staff mobility and the effective nationaldeployment of staff in the civil service. Public service relocation is increasingly being used by government to facilitatemodernization by using relocation as a catalyst to bring in new business practices. However, there is less of a willingness on thepart of government to connect relocation with flatter forms of more devolved governance.

Public sector relocation Reduced operating costs Balanced regional development Government modernization

M J. N., B D., H C., A N. et R R. (2005) Relocalisation, relocalisation,relocalisation: une evaluation des arguments en faveur de la dispersion du secteur public, Regional Studies 39, 767–787. A partirdes preuves provenant de la Grande-Bretagne, cet article cherche a evaluer les arguments en faveur de la relocalisation du secteurpublic depuis les capitales. En Grande-Bretagne, les hauts fonctionnaires sont surrepresentes a Londres. La relocalisation decertaines fonctions depuis la capitale permettrait la realisation des reductions non-negligeables des frais d’exploitation, et on sesert de telles economies pour justifier des programmes de relocalisation. Neanmoins, cet article souligne de bons argumentsregionaux en faveur de la relocalisation; a savoir, la relocalisation contribue directement a un developpement economique plusequilibre par voie de la creation d’emplois et reduit simultanement la surchauffe pres de la capitale et la sous-utilisation del’infrastructure et des ressources humaines dans d’autres regions. La relocalisation des hauts fonctionnaires depuis la capitalerenforce le secteur tertiaire au sein des zones defavorisees. Le caractere tres centralise et hierarchique de la fonction publique,conjointement avec la fermete du secteur prive pres de la capitale, sert de frein a la mobilite du personnel et au deploiementefficace du personnel de la fonction publique sur le plan national. Le gouvernement se sert de plus en plus de la relocalisationdes agents publics afin de faciliter la modernisation en employant la relocalisation comme catalyseur des nouvelles pratiquescommerciales. Cependant, l’administration s’avere moins disposee a relier la relocalisation a des formes d’administrationdecentralisee plus plates.

Relocalisation du secteur public Frais d’exploitation reduits Developpement regional equilibreModernisation de l’administration

M J. N., B D., H C., A N. und R R. (2005) Standortwechsel, Standort-wechsel, Standortwechsel: Beurteilung des Arguments fur Streuung des offentlichen Sektors, Regional Studies 39, 767–787.Dieser Aufsatz beurteilt das Argument, den Standort des offentlichen Sektors von Hauptstadten auf andere Orte zuverlegen, im Lichte der in Großbritannien gemachten Erfahrungen. Die hoheren Range der britischen Beamtenschaft sindunverhaltnismaßig stark auf London konzentriert. Signifikante Einsparungen bei Gehaltskosten konnten durch Verlegung derFunktionen der Beamtenschaft in Standorte außerhalb der Hauptstadt erreicht werden, und diese finanziellen Einsparungendazu benutzt werden,Verlegungsprogramme zu rechtfertigen. Dieser Aufsatz betont jedoch das starke Argument der Regionen furStandortwechsel, der durch die Schaffung von Erwerbsstellen direkt zu einer ausgeglicheneren regionalen Wirtschaftsentwicklungbeitragt, und gleichzeitig sowohl Uberhitzung in der Nahe der Hauptstadt als auch die mangelnde Nutzung der Infrastruktur

0034-3404 print/1360-0591 online/05/060767-21 ©2005 Regional Studies Association DOI: 10.1080/00343400500213663

http://www.regional-studies-assoc.ac.uk

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768 J. N. Marshall et al.

der ubrigen Regionen reduziert. Der Auszug der hoheren Range der Beamtenschaft aus London wurde ihrer Anwesenheit inproblematischen Regionen zugute kommen. Die stark zentralisierte und streng hierarchisch aufgebaute Natur der Beamtenschaftin Verbindung mit dem Auftrieb des privaten Sektors in Hauptstadtnahe fungieren auf gesamtstaatlicher Ebene als Bremse aufdie Umzugsfreudigkeit der Angestellten des offentlichen Dienstes. Standortwechsel der offentlichen Dienste wird seitens derRegierung zunehmend dazu benutzt, eine Modernisierung zu erreichen, indem Verlegung als Katalyst der Einfuhrung neuerGeschaftspraktiken dient. Man ist in der Regierung jedoch weniger gewillt, Standortwechsel mit weniger stark profiliertenFormen einer starker dezentralisierten Regierungsform zu verbinden.

Standortwechsel der offentlichen Dienste verringerte Betriebskosten ausgewogene RegionalentwicklungModernisierung der Regionen

M J. N., B D., H C., A N. y R R. (2005) Relocation, relocation, relocation:una evaluacion de argumentos a favor de la dispersion del sector publico, Regional Studies 39, 767–787. Este artıculo evalua losargumentos que justificarıan el traslado del sector publico a fuera de las capitales, utilizando el Reino Unido como ejemplo. Loscargos directivos mas senior de la administracion publica britanica se encuentran concentrados en Londres de formadesproporcional. Mediante la transferencia de algunas de las funciones de la administracion publica a fuera de la capital se podrıanconseguir importantes reducciones en los costes operativos, y tales ahorros financieros se han utilizado para justificar iniciativasde dispersion. No obstante, este artıculo pone el enfasis en los fuertes argumentos que existen a nivel regional para justificar latransferencia de funciones; la transferencia de funciones contribuye directamente – mediante la creacion de empleo – a undesarrollo economico regional mas equitativo y, al mismo tiempo, reduce el recalentamiento en las inmediaciones de la capitalası como la infrautilizacion de infraestructuras y recursos humanos en otras regiones. La transferencia de los puestos mas seniordentro de la administracion publica a fuera de Londres refuerza la base del sector servicios en aquellas regiones que sonproblematicas. La naturaleza altamente centralizada y fuertemente jerarquica de la administracion publica, combinada con la‘flotabilidad’ (buoyancy) del sector privado cerca de la capital, frena la movilidad de personal y el despliegue efectivo a nivelnacional del personal que trabaja en la administracion publica. El gobierno esta haciendo un uso cada vez mayor de la transferenciade la administracion publica para facilitar la modernizacion sosteniendo que la transferencia de funciones actua como catalizadorpara generar nuevas practicas de negocio. No obstante, existe una menor disponibilidad por parte del gobierno para estableceruna conexion con formas menos jerarquicas de una gobernanza mas descentralizada.

Transferencia de la administracion publica Reduccion de los costes operativos Desarrollo regional equitativoModernizacion del gobierno

JEL classifications: R11, R38, R53, R83

INTRODUCTION are a number of studies of private sector office reloca-tion, international research on the public sector is

In March 2004, the Chancellor of the Exchequer, equally limited; it is narrowly focused on relocationGordon Brown, welcomed the recommendations of Sir programmes rather than wider regional developmentMichael Lyons’ review to relocate approximately 20 000 issues and displays an almost complete lack of inter-public sector jobs from London and the South East of national comparative studies (P et al., 1993).England.1 The Lyons review proposes a more spatially Nevertheless, a number of governments have intro-sensitive approach to business planning in the civil duced programmes of public office dispersal, illustratingservice. It links a centrally coordinated programme a variety of different approaches (L , 2004,of relocation to slimming down of the Whitehall pp. 147–152). France has had a policy of dispersal ofheadquarters of the civil service and the expansion of public and private offices from Paris for approximatelyclusters of civil service employment in large provincial 50 years. Currently, the Committee for the Territorialcities. Drawing on evidence submitted by the Centre Establishment of Public Employment aims to achieve afor Urban and Regional Development Studies to the balanced distribution of public sector employment byLyons review, a critical appraisal of research conducted requiring public sector offices to apply for permissionfor the Lyons team itself and interviews with seven to establish or refurbish offices in the Paris area and bymanagers responsible for proposed Lyons relocations, encouraging offices that do not need to be near thethe paper assesses the case for public sector dispersal capital to relocate to large regional metropolitanfrom capital cities. centres.2 In 2003, Ireland announced a programme of

The relocation of public sector work from London dispersal of 10 000 posts from Dublin including eightand its environs to the regions is an issue that is raised departmental headquarters and the Office of Publicevery 10 years or so when development pressures Works.3 In 1999, the German Federal Governmentincrease public sector costs and cause problems for and Parliament relocated from Bonn to Berlin. Otherpublic sector operation close to the capital. British countries with programmes of relocation of governmentacademic research on public sector relocation tends to work include Japan, Norway and within Britain both

Scotland and Wales.4 These programmes seek to achievemirror this intermittent political interest. Though there

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Assessing the Case for Public Sector Dispersal 769

similar goals of cost reduction, improved efficiency and, head offices of large international corporations, majornational non-profit and non-governmental organ-to a lesser extent, regional balance. Modernization or

reform of public services has increased in prominence izations and associated consultancy suppliers (CC , 2003). This encourages more rapid economicin the last 20 years reflecting pressures to expand public

services in response to demand while at the same growth in London and the South East and simultaneousoverheating in large parts of these regions and under-time tightly controlling public expenditure (W ,

1989). In Japan, an important additional driver for utilization of infrastructure and human resources inother areas. Thus, a shift in the geography of publicrelocation has been to protect administrative functions

from the threat of natural disasters, and since the sector employment can have a positive effect on thefortunes of lagging regions, whilst also freeing up someterrorist attacks on New York on 11 September 2001,

in a number of countries the threat of terrorism has capacities in London and the South East and reducinginflationary pressures there ( J and T,increased in significance as a factor encouraging govern-

ment dispersal.5 Research assesses whether the functions 1993, 1996). Such nationwide benefit is rarely consid-ered by offices relocating, where the focus is usually ondispersed should be strategic in nature or mainly routine

(P et al., 1993). Similar pitfalls resulting from the cost savings to the department. A et al. (2003),however, go further and argue for a sustained attemptdispersal are discussed including disruption, communi-

cation problems and the isolation of relocated parts to develop new ways of dispersing economic activityto the regions using the decentralization of the head-of government. The degree to which decentralized

functions should be clustered in particular locations is quarters of public sector bodies to create a multinodalnation with a ‘dispersed centre’ in which the nationalso considered. Analysis of public sector relocation in

Britain, therefore, has more general resonance. Of does not ‘speak from one place’. This suggests thatrelocation needs to be considered as part of a widerparticular note is the difficulty in establishing the

regional case for relocation and this is the main theme restructuring of the management and organization ofthe public sector, and this issue is also addressed in theof the paper.

In Britain, the relocation of civil service and related paper.public sector jobs from London and the South East hastraditionally been justified primarily on grounds of cost

CHANGING LOCATION OF THEsavings to a particular department. We confirm earlierCIVIL SERVICEresearch that indicated there is a strong financial case

for the relocation of public sector work from the capital, Spatial concentration of the higher echelons of the civil servicebut also suggest that this is only part of the picture. It

The Lyons review focuses primarily on civil serviceis important to analyse the relocation of public sectordepartments, and thus the paper begins by outliningwork more widely. Government expenditure on thecivil service location. It is well known that civil serviceadministration and delivery of services is an importantemployment is over-represented in London relative toeconomic activity that can be used strategically tototal employment, and the capital has 41 civil servantspromote regional development, including to ‘makeper 1000 employees compared with an average of 31 persustainable improvements in the economic performance1000 for England as a whole (Table 1). The North Eastof all English regions and over the long-term reduceof England is the only English region with a higherthe persistent gap in growth rates between the regions’

(H . M. T, 2002, p. 11). Rethinking thegeography of the public sector, including both reloca-

Table 1. Regional distribution of civil servants (permanenttion and other forms of restructuring, creates an oppor-full-time equivalent staff) in relation to total employment andtunity to achieve better-balanced and sustainable growth

population in England, 2002across the country as a whole, reducing the cost andalso improving the effectiveness of public services. Civil servants per

Civil servants per 1000 workingHowever, though the regional case for relocation is1000 employees age populationmore appreciated in Lyons than in earlier reviews, civil

service efficiency and reform still remains the dominant London 41.0 17.9South East 24.7 11.2theme. This is consistent with A et al.’s (2003,Eastern 18.5 8.4p. 1) view that there is a misalignment of the ‘powerSouth West 35.5 15.7dynamics’ in the British economy reflecting the concen-West Midlands 22.1 9.6

tration of power in the ‘small introspective space around East Midlands 17.7 7.7Parliament and Whitehall’, and they argue that this is North West 32.2 13.5

North East 47.4 18.7an important force helping to establish a virtuousYorkshire and Humberside 25.8 11.1cycle of growth that underpins regional inequality. TheEngland 31.0 12.6concentration of government functions in the capital

anchors the knowledge economy both as an employer Source: Civil Service Statistics; Regional Trends; Office of NationalStatistics.in its own right, as well as attracting around it the

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770 J. N. Marshall et al.

representation of civil service employment in total has a higher proportion of its civil service employmentin all grades above the level of Senior Executive Officeremployment than London, undoubtedly indicating

the impact of previous programmes of government (SEO) than other regions (Table 2). The Senior CivilService has negligible representation outside London.dispersal. Other regions range from 18 civil servants

per 1000 employees in the East Midlands to 36 per Some 81% of the English Senior Civil Service is basedin the capital and 49% of the employment in Grades 61000 in the South West. On this measure, the number

of civil servants per employee in the South East is below and 7 (74 and 47% of the UK employment, respectively,excluding the devolved administrations). The mostthe average for England. The drawback of measuring

the concentration of civil service employment in this obvious contrast is with the North East of Englandwhere 67% of the regional civil service is in the lowestmanner is that it is influenced by the impact of the

performance of other sectors on total employment, and two grades of Administrative Officer (AO)/Assistant(AA) and the North West where these employeesit takes no account of differences in unemployment or

activity rates. If one is concerned with the equitable account for 60% of the regional civil service.This pattern of concentration of senior staff in thedistribution of civil service employment, then it is also

appropriate to standardize by the population of working civil service reflects the spatial centralization of headoffices in civil service departments and other publicage ( J and T, 1993). Using the

number of civil servants per 1000 population of working sector bodies (e.g. English Heritage, UK Sport,National Blood Authority, Healthcare Commission)age as a measure of concentration reduces the scale of

the regional differences in civil service employment (Table 3). All 20 departmental head offices are inLondon, though Yorkshire and the Humber share ashown in Table 1, but it confirms the broad picture.

Again London and the North East have the highest headquarters. Of the 310 public sector bodies sponsoredby departments recorded in the Civil Service Yearrepresentation of civil service employment (18 and 19

civil servants per 1000 population of working age, Book, 79% are either located or based in London. Thespatial concentration of senior decision-making is lessrespectively). The South East is again under-represented

relative to the average for England (11 civil servants per strong in the agencies created in the last 10 years or so,nevertheless the lion’s share (55%) is in London. At the1000 population compared with 13 per 1000), and the

lowest representation of civil servants is found in the other extreme are the North East and the East Midlandsthat have only one agency head office and four publicEast Midlands (eight civil servants per 1000 population).

This distribution of civil service employment is broadly sector bodies based in each region.The impact of this spatial concentration on labourreflected in patterns of regionally relevant government

expenditure where regional expenditure per head is costs is indicated by the fact that regional median salariesfor the Civil Service in London and the South East atinversely related to Gross Domestic Product per head

because key headings such as social security, health, and £21 700 and £18 600 per annum, respectively, are wellabove the national average of £17 000 (Table 4). Intrade and industry are targeted on disadvantaged areas.

The case for public sector dispersal from the capital is London’s case, these salary differences are not producedsimply by differences in grade mix. Median salaries forreinforced, however, by the evidence that London is an

outlier having along with the North East the highest each grade in the civil service are higher in the capitalthan elsewhere, indicating the influence of the Londonregional expenditure per head (ML , 2003).

Though such an over-representation of civil servants weighting on salaries and the fact that staff are probablyhigher up the scale than their counterparts in the prov-in London is not entirely surprising, more striking is the

extent to which the higher echelons of the civil service inces. This undoubtedly reflects the impact of the buoy-ant local labour market and costs in the capital onare overwhelmingly concentrated in the capital. London

Table 2. Distribution of civil service employment by region and grade in England, 2002

Regional civil service employment (%)

Senior Civil Higher/Senior AdministrativeService Grades 6 and 7 Executive Officer Executive Officer Officer/Assistant Other

London 2.8 10.7 24.2 25.1 36.7 0.5South East 0.2 2.9 15.9 25.0 49.2 6.9Eastern 0.2 2.9 17.3 25.1 54.0 0.5South West 0.3 4.7 22.6 24.6 43.4 4.3West Midlands 0.2 3.2 13.4 25.4 56.6 1.2East Midlands 0.2 3.2 14.1 24.9 57.0 0.6North West 0.2 3.0 11.9 24.4 60.4 0.1North East 0.1 1.8 9.3 21.5 67.3 0.1Yorkshire and Humberside 0.4 4.1 16.4 26.7 52.2 0.3

Source: Civil Service Statistics.

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Assessing the Case for Public Sector Dispersal 771

Table 3. Regional location of department and agency head offices and public sector bodies sponsored by departments, 2002

Yorkshireand

North North Humber- East West SouthLondon South East East West side Midlands Midlands Eastern West

Department headquarters 20 1( joint withLondon)

Department regional office1 3 7 5 7 9 6 5 9 7Agency and other departmental office

headquarters 51 14 1 4 6 1 3 2 11Agency, etc. regional office 20 18 5 15 15 12 10 11 15Other public sector bodies

Headquarters 14 1 1 2Regional office 8 15 8 16 12 7 12 13 13Single site 231 17 4 6 4 4 10 6 10

Notes: 1Regional offices for the Department of Culture, Media and Sport, Department of Trade and Industry, and Office of the Deputy PrimeMinister are through government offices for the regions and are not included in these totals.

Source: Civil Service Year Book.

Table 4. Median salary of permanent non-industrial civil servants by region and grade, 2002

Senior Executive AdministrativeOfficer/Higher Officer/

Senior Civil Grades 6 and 7 Executive Officer Executive Officer AdministrativeService level (£) (£) (£) (£) Assistant (£) Total (£)

London 68 700 44 460 28 000 20 750 16 050 21 760South East 67 440 43 280 26 180 19 920 14 190 18 640South West 64 110 42 690 26 560 19 450 13 500 18 000West Midlands 63 510 42 610 25 280 18 970 13 580 15 990North West 63 490 43 630 25 040 18 970 13 240 15 360North East 64 520 41 580 24 830 18 680 13 040 14 770Merseyside 65 990 43 960 24 710 18 400 12 750 14 910Yorkshire and Humberside 63 800 41 530 24 870 18 830 13 800 16 370East Midlands 64 680 43 240 25 310 18 970 13 740 16 120Eastern 66 610 43 110 25 790 19 240 13 930 17 060Wales 62 930 43 350 25 110 18 660 13 050 15 440Scotland 62 920 42 990 26 370 19 920 13 130 16 090Northern Ireland 70 710 42 860 25 920 20 420 13 040 15 540Overseas 70 490 45 250 31 050 22 510 17 570 28 820

Total 67 100 43 370 26 360 19 680 13 860 17 060

Source: Cabinet Office.

salaries. It is worth also commenting briefly on the successive governments reduced the size of the publicsector. During this period, civil service employment inNorth East of England and Merseyside that have the

lowest median salaries for civil servants in England London and the South East declined faster than else-where. London accounted for 23% of civil service(£14 800 and £14 900, respectively), and consistently

display the lowest median salaries across all SEO/Higher employment in Britain in 1976, but only 19% in 1997.The South East possessed 16% of the national civilExecutive Officer (HEO), Executive Officer (EO) and

AO/AA grades. service in 1976 and 14% in 1997. Table 5 showsemployment change in the civil service by regionChanges in the definition of regions and in the scope

of the civil service itself make the analysis of trends in between 1997 and 2002, when the data are not seriouslydistorted by changes in the scope of the civil service.civil service location difficult. Nevertheless, it is clear

that programmes of relocation of public sector work Overall in a period when civil service employmentincreased again nationally (to 516 000 by 2002), thefrom London, and numerous locational adjustments by

individual departments, have decentralized civil service long-term decentralization trend continued. The mostrapid growth in civil service employment is recordedemployment from London and the South East over the

last 40 years or so (Table 5). Between 1976 and away from London and the South East, most notablyin the Eastern, North East and Merseyside regions.1997, civil service employment in Britain declined

substantially nationally from 763 000 to 496 000 as Employment in the South East continued its relative

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772 J. N. Marshall et al.

Table 5. British civil service employment ( full-time permanent staff) by region, 1976–2002

Employment (000s)

1976 1997 2002 Change, 1997–2002 (%)

London 170.7 86.6 86.8 0.2South East 117.4 62.2 57.3 ñ7.9Eastern 36.7 24.1 28.8 19.5South West 84.8 50.7 48.2 ñ4.9West Midlands 36.2 31.1 31.9 2.6East Midlands 51.9 41.7 40.4 ñ3.1North West 35.4 24.7 29.9 21.1North East 19.8 13.5 17.0 25.9Merseyside 37.1 32.2 35.1 9.0Yorkshire and Humberside 28.6 20.6 20.6 0Wales 39.5 26.5 30.0 13.2Scotland 71.2 45.8 46.2 0.9

Source: Civil Service Statistics.

and absolute decline and by 2002 it accounted for terms of absolute numbers, the main civil serviceemployers in London are the Department of Work and12% of civil service employment nationally, though

interestingly the civil service increased by 200 jobs in Pensions with 14 000 staff in London, and the HomeOffice and Inland Revenue with 10 000 and 7000 staff,London between 1997 and 2002.6 This implies the

presumption in favour of locating new public sector respectively. These departmental differences reflect thestrong pull of Whitehall for many advisory and policyactivities away from London, as recommended in the

White Paper Your Region, Your Choice is not being jobs, and the influence of extensive regional officenetworks or facilities in a number of departments.implemented (L , 2003).

There remains considerable variability between However, the variability between departments clearlyindicates that it is possible for a wide range of civildepartments in terms of their concentration of employ-

ment in London. The Treasury and the Department of service activities to operate successfully outside thecapital. This was certainly the view taken in the LyonsCulture, Media and Sport have close to 100% of their

total employment in the capital compared with 1% for review, which argued a significant amount of backoffice and policy work currently in London couldthe Royal Mint and Ordinance Survey (Table 6). In

Table 6. Concentration of employment ( full-time permanent staff) in government departments in London, 2002

National DepartmentalEmployment in London (%) Employment in London (000s)

H. M. Treasury 100 1.0Department of Culture, Media and Sport 98.5 0.7Cabinet Office 77.7 1.6Foreign and Commonwealth Office 76.8 5.7Department for International Development 67.1 1.0Home Office 54.7 10.2Department of Health 52.5 2.7Department of Trade and Industry 51.3 5.0Department of Education and Skills 45.4 2.2Lord Chancellor’s Department 40.6 4.6Department of Environment, Food and Rural Affairs 27.4 2.6Customs and Excise 25.0 5.5Office of National Statistics 24.6 0.7Crown Prosecution Service 23.2 1.5Department of Transport, Local Government and the Regions 20.8 3.7Health & Safety Executive 17.1 0.7Prison Service 14.4 6.0Department of Work and Pensions 11.4 14.0Inland Revenue 10.5 7.1Land Registry 9.8 0.8Ministry of Defence 7.4 6.6Ordinance Survey 1.0 0.1Royal Mint 1.0 0.1

Note: The Welsh Assembly, Scottish Executive Registrars of Scotland and the ‘other department’ categories are excluded.Source: Civil Service Statistics.

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Assessing the Case for Public Sector Dispersal 773

Table 7. Civil service relocation from London and the South East and new posts established in the regions, 1963–93

Number of posts Number of Number of postsNumber of in newly posts located or Number of in newly Planned

posts dispersed, established relocated, posts relocated, established relocations as at1963–72 offices, 1965–72 1973–88b 1989–93 offices, 1989–93 October 1993

6222 2782 – – – –South East1192 – 780 295 11 640East Anglia692 640 420 925 786 3892South West279 – 290 607 1666 108West Midlands211 535 – 1280 133 900East Midlands783 – 2337 2793 13 1027Yorkshire and Humberside

4176 1821 3145 2847 740 249a

North West3112 265 470 1935 141 –North1174 1652 818 1782 11 –Wales4684 1797 2092 994 767 60Scotland

– – 20 515 650 –Northern Ireland– – 1264 6 45 6Various

Total 22 525 9492 11 636 13 979 4963 6882

Notes: aIncludes 139 new posts.bUnderestimates moves to the South East.

Sources: H. M. Treasury; H (1973); J and T (1996); M (1996).

be carried out elsewhere (L , 2003, 2004). The blocks of routine work that could operate effectivelyoutside the capital and would therefore benefit fromevidence also implies some decisions to locate functions

in the capital (especially call centres) may have been the savings in operating costs that were available outsideLondon. This initiative resulted in the dispersal oftaken without a full consideration of their cost implica-

tions (M et al., 2003). 22 500 civil servants from London between 1963 and1972, and 70% of these went to the Assisted Areas.During the same period a further 9500 jobs were

Rounds of relocation of junior jobsestablished outside London as a result of the establish-ment of posts in new offices. In 1973, 31 000 jobs wereThe relocation of government work is a recurring

cyclical phenomenon reflecting the persistent growth earmarked for dispersal from London in the Hardmanreview. Again, this was a centrally planned exercise withof London and the South East region, which produces

substantial inflationary cost pressures close to the capital the aim of ensuring the most efficient solution fromthe perspective of operating costs. Units of more senioras the national economy expands. This increases public

sector costs, principally office rents and salaries, and staff requiring regular contact with London were eitherretained in London or recommended for short-distancemakes it difficult for the public sector to both attract

and retain labour, given that public sector salaries relocation. Larger units of clerical or data-processingwork were to be relocated to more peripheral areas.typically lag behind the private sector in the South East

of the country. Government’s commitment to control However, though there was some support for theHardman proposals within government at the timepublic expenditure and reduce the cost of public service

delivery adds to pressures for decentralization from high ( John Mohan, personal communication7), in practicefew of the Hardman decentralizations actually occurred,cost locations near the capital. The decentralization of

government work from London has usually coincided and only 11 500 jobs were decentralized from Londonbetween 1973 and 1988. From the mid-1970s, andwith a strong government commitment to regional

policy. However, dispersal has waxed and waned primar- especially after 1979, government was more interestedin controlling public expenditure than relocating theily in response to the property and labour market

situation in London and the South East. civil service. However, in the late 1980s, the overheatingof London and the South East created problems forThe rounds of civil service dispersal have been

individually small in scale, nevertheless the civil service civil service recruitment and rising property rentalsagain encouraged decentralization. In contrast to previ-has played a prominent role in the relocation of office

jobs from the capital. In total, approximately 69 000 ous rounds of relocation, this was not a centrally plannedand managed exercise. Though the Treasury introducedstaff have been decentralized from London and the

South East over the last 40 years, a time when civil a review of the location of departments in the annualexpenditure round, the relocation decision was left upservice employment in the capital declined from about

181 000 to 87 000 (Table 7). The first round of to individual departments, and while departments hadto consider locations in the Assisted Areas there was nodecentralization initiated in 1963 by Sir Gilbert

Flemming proposed the dispersal of self-contained obligation to move there. Between 1989 and 1993,

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774 J. N. Marshall et al.

19 000 posts were relocated or established outside the ‘broke even’ within 7 years. The move was still finan-cially viable at 7 and 10% discount rates. ASouth East, and a further 6800 jobs planned foret al. (1988, p. 6) conclude, ‘the ODA dispersal to Eastdecentralization (Table 7). Cost savings again predomi-Kilbride was both an efficient use of resources at a UKnantly drove relocation. According to J andlevel and a highly cost-efficient means of transferringT (1996), relocations went predominantly toemployment and activity from London and the Southlarger regional centres with good quality office accom-East of England to a development area’.modation and labour availability. On average, 37% of

In 1989–90, CURDS developed a comparative coststaff moved with the unit and 63% were recruitedmodel to examine spatial cost differences in rents,locally. Very few senior grades were dispersed andlabour and communication costs (business travel) andapproximately 70% were in AO/AA grades and 27%offset these against the cost of a proposed decentraliza-in executive grades. With the downturn of the economytion of a government head office of 180 people fromafter 1989, the number of relocations declined due toCentral London to a number of alternative locationsthe collapse of the commercial property boom in(M et al., 1991). This work confirmed thatLondon, and recession also lessened the labour turnoveroperating costs remained substantially lower (on averageproblems being experienced by the public sector in the20–30% lower) outside the South East of the country.capital (M, 1996). To avoid such cyclical shiftsAgain, as in the East Kilbride relocation, the increasein policy, it is clearly necessary to take a strategic viewin communications costs on decentralization was smallof the relocation of public sector work and see it in arelative to the impact of substantial reductions in labourlonger-term perspective.and rental costs. Savings of approximately £6 million(in 1989 prices) over 25 years appeared achievable in anumber of locations outside London and the South

PUBLIC SECTOR RELOCATION AND East and the additional costs of the move (e.g. redun-OPERATING COSTS dancy and relocation costs) could be paid for in 5–6

years at a 10% discount rate. Significantly, by the earlyPrevious research1990s, the growth of the South East had pushed up

The geography of operating costs has been a significant rental levels and tightened labour supply in a wider areainfluence on these patterns of relocation. Studies of than in the 1960s and 1970s. It was necessary foroffice relocation from London, carried out in the 1960s decentralizations to go further out, approximately 80–and 1970s, suggested considerable savings in operating 170 miles, to achieve the greatest cost savings. Thiscosts could be achieved by decentralizing offices from explains why there were few short-distance relocationsthe capital. Operating costs fell rapidly with distance in the late 1980s and early 1990s. However, very long-from Central London; beyond 50 miles there were few distance relocations were also less popular because,further reductions in rents, rates and salaries, and beyond beyond approximately 170 miles from the capital,80 miles no further reductions in operating costs were increases in communications costs begin to erode theachieved and communications escalated to make reloca- savings in rents and labour costs for a communicationtion uneconomic (G and P, 1977). More intensive head office.detailed cost–benefit analysis of public sector relocationregards moves as an investment decision where the

Current pattern of costsinitial costs of dislocation are associated with futuresavings. Any savings in operating costs (e.g. reduced We have recalculated our comparative cost model usingpayment of the London salary weighting) are offset contemporary information on property, communi-against the increased costs of operation at the new cation (business travel) and labour costs. Table 8 sum-site (e.g. additional communication costs) and then marizes the key assumptions held constant in the modelexpressed in fixed prices and discounted back to a established in 1989–90 and used in this analysis. It isparticular date (to reflect the interest rate on borrowing again based on 180 staff requiring 40 000 ft2 of officeto fund the investment). For example, in a study of space relocating from Central London. The citiesthe dispersal in 1981 of 427 posts in the Overseas included in the analysis as alternative destinations areDevelopment Administration (ODA) from Central important regional office centres included in our ori-London to East Kilbride, A et al. (1988) ginal analysis (M et al., 1991). Some 42 staffsuggested that the initial dislocation costs were of the are assumed to relocate with the unit and the remainderorder of £4 million (in 1987–88 prices). Cost savings are employed locally. Business travel to London fromof approximately £28 million in rents, rates and salaries the regions was assumed to require ten extra journeyswere achievable over 30 years, while the additional per week to London. The costs of relocation remainadministrative and communications costs were much specific to the organization involved in 1989–90, butsmaller (£10 million). At a 5% discount rate, the net these have been inflated from our original estimatespresent value (discounted back to 1981–82) of savings (Table 8). The retention of a small London base is also

assumed. Savings were again calculated as a net presentin the move was almost £15 million and the dispersal

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Assessing the Case for Public Sector Dispersal 775

Table 8. Estimated civil service relocation costs of a move from London to the regions, 2003

(a) Updating the 1989 benchmark scenario to 2003

Work days lost per weekNet Present Value (£ millions) Pay back (years) (travel time measure)

Location 1989 2003 1989 2003 1989 2003

Peterborough 8.33 6.42 5 8 4 3Liverpool 10.23 5.58 4 9 4 9Sheffield 8.29 5.53 5 9 5 4Nottingham 9.41 5.51 5 9 7 5Birmingham 7.97 4.32 5 10 4 3Southampton 7.28 3.89 5 11 11 8Newcastle 8.40 3.71 5 11 14 12Leeds 7.74 3.69 5 11 10 7Manchester 8.34 3.52 5 11 6 6Bristol 6.17 3.48 6 11 7 6

Notes: Key assumptions of this relocation scenario are as follows:

Ω Office of 40 000 ft2 and 180 staff.Ω Forty-two key staff relocate.Ω Contact pattern assumes ten trips to London per week.Ω Investment time horizonó25 years.Ω Discount rateó10%.Ω Normal labour turnoveró18%.Ω Travel time is not assigned a cost.

This is the benchmark relocation scenario used in our previous analysis. The costs of relocation have been inflated to reflect currentvalues and include: removals (£100 000), recruitment costs (increased by 50%), training costs (increased by 50%), relocation team (oneSEO, two HEO, two typists) additional staff (increased by 55%) and the retention of a London base (one EO, one HEO andaccommodation). An individual relocation package of £33 000 and a redundancy package based on an average of 17 years of serviceand an average age of 45 (the data assumes 60% of staff take severance and 40% early retirement) was estimated by a governmentdepartment based on actual downsizing exercises and using flexible voluntary terms which are greater than compulsory redundancy.

(b) Adjusting the 2003 estimates to reflect regional variation in median salaries

Net Present ValueLocation (£ millions) Pay back (years)

Liverpool 6.98 8Peterborough 6.51 8Sheffield 6.48 8Nottingham 6.02 8Newcastle 5.14 9Birmingham 5.02 9Leeds 4.64 10Manchester 4.38 10Southampton 3.44 11Bristol 3.39 11

Notes: Key assumptions: the post-move salary figures for the selected civil service department are adjusted (by an index) to mirror the regional differencesin actual civil service salaries by grade in Table 4. Effectively this assumes that in local labour markets with lower average civil service salaries, itis possible for the service to appoint staff at lower points on the national scale than in higher wage areas. It should be recognized that the ‘topheavy’ grade structure of the original civil service headquarters relocating in 1989–90 will still affect these results.

value over 25 years at a discount rate of 10% (though major institutional property investors, and not the lessreliable prime office rentals used in our earlier analysis.this is high in the current low interest rate environment

it is retained for comparative purposes). The model For this reason, we have recalculated our 1989 datausing historical information from IPD. Current rentaldoes not include reductions in business rates, regional

differences in the cost of recruitment or any improve- levels are highest in London (£20/ft2), but differencesare muted outside the capital, as was found in ourments in business operation post-move.

There are some differences in the data used in the previous research (M et al., 1991). The lowestrental levels were found in the Eastern and East Midland1989–90 and 2002–03 models. Current information on

rental levels is derived from the Investment Property regions (£11/ft2). The contrast between CentralLondon and provincial centres is more marked than theDatabank (IPD), which contains estimated rental data

on some 12 000 properties mainly in the ownership of regional data with the West End achieving average

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776 J. N. Marshall et al.

rental levels of £30/ft2 and the larger cities, and urban communication costs are a small element of total costs),and it only slightly reduces the ranking of Liverpoolcentres closer to London, offering rents typically in the

range £15–16/ft2. The variation that has developed in and Newcastle, locations with among the highest work-days lost to travel per week (Table 8). The costs ofcivil service terms and conditions of employment over

the last decade means that we have based our 2002–03 relocating a public sector office from other sites in thecapital are estimated by assuming an office rental ofestimates of current labour, individual relocation and

redundancy costs on actual data provided by a large £20/ft2, which is the average for London as a whole.This suggests that the relocation of a public sector officecivil service department. This includes an individual

relocation package of £33 000 and a redundancy pack- remains economic, but the case is not nearly so strong.In this scenario, it only makes sense to relocate our headage based on an average of 17 years service and an

average age of 45 (the data assumes 60% of staff not office to cities closer to London where communicationcosts are less (Table 8). However, we have also estimatedrelocating take severance and 40% early retirement).

This is higher than the original assumptions in 1989– the impact of regional differences in civil service pay.We again need to be cautious about these results.90 and reflects our view that mobility clauses may

be more difficult to enforce and redeployment more Salaries from one civil service department have beenadjusted by an index that reflects the regional differencesdifficult to achieve in the present civil service.

The changes to the data mean we are cautious about in median civil service salaries by grade shown inTable 4. Basically, the effect is to strengthen the positionthe conclusions of our analysis. However, comparing

our 2002–03 analysis in general terms with 1989–90, of Newcastle and Liverpool in the rankings of costsavings, because they are both locations with compara-salary savings on relocation are slightly higher in

2002–03 and rental savings slightly lower. Overall tively low civil service labour costs. In addition, it alsoreduces the ranking of locations in the south of theoperating cost savings are in the range of 20–26% in

2002–03 in the cities chosen compared with 30–35% country most notably Southampton and Bristol, becausesalaries in the South East and South West regions tendin 1989–90. This difference predominantly reflects the

impact of a reduction in the rental gradient between to be higher (Table 8).In sum, based on this analysis, it is concluded that inLondon and the regions between 1989 and 2003.

However, the basic spatial pattern of costs that were 2002–03 relocating even a communications-intensivecivil service head office from Central London todescribed in 1989–90 still applies in 2002–03. By

relocating a communications-intensive civil service regional locations can produce substantial operatingcost savings. The data also confirm earlier work indicat-head office from London to a variety of provincial cities

(including locations in the south of the country such ing that the pattern of location costs in the 1960s andas Southampton and Bristol), it is again possible to 1970s, which favoured locations close to London, hasachieve substantial cost savings and these are indicated changed and financial savings can be achieved in moreto be of the order of £3–6 million (2002–03 prices) distant locations.over 25 years. Compared with our earlier analysis, thescale of savings is reduced and the payback for the moveis extended from the 4–7 to 8–11 years in 2002–03

Case studies of government office relocation(Table 8). Again these differences reflect the fact that1989–90 was the peak of the Lawson–Thatcher boom in To extend the conclusions of the comparative costLondon and the South East, which had an unsustainable model, case studies were conducted of the Patent Officeimpact on rental levels. move to Newport, the Inland Revenue relocation to

In our 1989–90 analysis, we argued that days lost to Nottingham, the Department of Social Security andbusiness travel need to be set against the estimated National Health Service Executive joint move to Leeds,savings achievable by relocation from London, but no and the Met Office relocation to Exeter (Mattempt was made to cost these. We also took no et al., 2003). Based on interviews with relocationaccount of any regional differences in civil service salary managers and secondary sources, the case studies pro-levels other than between London and the rest of the vide evidence on head office or specialist technicalcountry. The previous analysis in the paper shows that functions that are more difficult to relocate, rather thanthese are considerable, and their possible impact is routine blocks of clerical work typical of previoustherefore examined below. Previous research has con- relocations. They indicate that following relocation,centrated on relocation from Central London; we now government offices achieved a range of qualitativeestimate the impact of relocating an office from other improvements in operation neglected in the compara-parts of the capital where rents are lower. We have tive cost model, including the following:costed travel time (at the HEO level), assuming that all

Ω Improvements in the quality of office accommoda-travel time is a cost to the organization, clearly antion resulting from vacating high-cost, old, outdatedoverestimate since staff work on the train and someand inefficient buildings in London. Relocationtravel is in non-work time. However, even so, the

impact on the relocation scenario is marginal (because facilitated a move to a prestigious new bespoke

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Assessing the Case for Public Sector Dispersal 777

building designed to meet the current business needs conducted and carefully monitored they can achievesignificant cost savings. Not all moves achieved all theof the organization.savings predicted in pre-move cost–benefit evaluationsΩ Work was centralized at one location reducing(Table 9), and the N A O (1994,difficulties associated with spreading work across1996) and the P A Cmany sites in London.(1996) have identified shortcomings in relocationΩ Reduction of recruitment and retention problemsappraisal techniques and the implementation of theparticularly associated with more qualified staffmove within departments. To maximize cost savingsbecause offices outside London and the South Easton relocation requires detailed guidance covering thehave lower recruitment costs and better staffmanner in which costs and savings are incorporated inretention.the business case for relocation and in post-moveΩ Moves frequently occurred at a time of considerableevaluations.change within the organization and were used to

Relocation consultancies play an important role,accommodate or reinforce this. The Patent Office,together with their clients’ preconceptions, in shapingfor example, decided that patent officers did notthe outcome of the location decision. Both naturallyrequire face-to-face contact with customers infocus primarily on the perspective of the client depart-London and could be trained to provide servicesment and give less weight to wider regional issues. Notremotely using computers, thus making relocationall relocation teams have sufficient contact with localto Newport possible.agencies. Consequently, civil service relocations in theΩ Post-move evaluations suggest that relocations1990s were at times in competition with each other forachieved improvements in business operation. Thethe same space. One of the case study relocations wasPatent Office and the Inland Revenue customercharacterized by relatively arbitrary decisions on thesurveys reported significant improvements inneed for communications connectivity when this travelresponse times and in the quality of service providedwas experienced by a small number of individuals,(N A O, 1994; Iand quality-of-life indicators were used that did notR, 1996). The quality of staff available inrecognize that there are significant differences in suchthe provinces was regarded as higher than in London.indicators within regions. This discouraged relocationOverall, these results suggest that relocation can beto provincial cities (that perform poorly on some qualityan important catalyst for change.of life indicators) when staff actually live in less-

Information on the financial costs and benefits of the urbanized locations nearby. Again, this suggests a needfor careful appraisal and central guidance.relocations confirms that where relocations are well

Table 9. Assessment of the financial costs and benefits of public sector relocation

Department of SocialSecurity (DSS)/

Overseas National HealthDevelopment Service (NHS)

Administration Patent Office Inland Revenue Executive Met Office

Date of move 1981 1988–92 1995–96 1992–93 2002–03Main locations involved London to East London to Newport London to London to Leeds Bracknell to Exeter

Kilbride Nottingham

Number of staff relocating 427 592 1800 2100 1200

Net Present Value (NPV) estimate – £6.4 million £47.8 million £165.1 million –pre-move (1992–93 prices) (1993–94 prices)

Post-move NPV assessment £14.9 million £3.4 million £49.3 million £116.8 million –(1987–88 prices) (1992–93 prices) (1996 prices) (1993–94 prices)

Discount rate (%) 5 5 11.3 (12.08 for ? –pre-move)

Period of evaluation 30 years 16 years (10 years for ? 60 years DSS and –pre-move) NHS

Break even/pay back year seventh year after ? 11th year after move 17th year DSS/19th –move NHS after move

(14th year pre-move)

Reference A et al. N A I R N A Interview(1988) O (1994) (1996) O (1996)

Note: Studies were conducted at different times, adopted different methodologies, and included different costs and benefits making detailedcomparison impossible.

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778 J. N. Marshall et al.

The case studies highlight the problems that arise restructuring (C O/H . M . T,2003). It is perhaps not surprising, therefore, that thewhen relocating more senior civil service staff from the

capital. Isolation from the rest of the department may initial relocations proposed in L (2004, pp. 55–64) look like the more junior functions and postsresult from dispersal. The NHS Executive move to

Leeds probably underestimated the need for increased included in previous rounds of relocation. Such reluct-ance to disperse more senior functions will only bebusiness travel back to London to maintain access to

Ministers. The latter disruption often falls particularly overcome if departments are encouraged to be assertivein their relocation proposals.on staff critical to the operation of the department.

However, the case studies also show where potentialcommunications problems are identified in advance aLondon base can be retained or opportunities provided REGIONAL CASE FOR PUBLIC

SECTOR RELOCATIONfor some staff to work from more than one site or fromhome. Creating a critical mass of civil servants at thedestination location and establishing related functions

Public sector dispersal from Hardman to Lyons

Substantial public sector relocation requires a strongat the same site reduces external communications andprovides local career opportunities for staff. Reorganiz- government commitment to a regional agenda and this

has been missing in previous rounds of relocation. Theing the way work is conducted by using telephone andvideo conferencing facilities and electronic means of Hardman report in the 1970s represents the most

extensive previous British analysis of the case for thecommunication (especially email) is particularly effec-tive where the information and communication tech- dispersal of the public sector from London (H ,

1973). Though Hardman sought to balance civil servicenology network is updated at the same time asrelocation. operating costs and wider regional development con-

cerns, the emphasis remained on identifying the lowestIn addition, seven interviews were conducted withmanagers responsible for proposed relocations in the cost location based on operating costs for individual

departments. Communication costs were given specialLyons review. Reflecting the focus of the civil serviceon the ‘small introspective space around Parliament and consideration and units of more senior staff requiring

regular contact with London were recommended forWhitehall’ (A et al., 2003, p. 1) managers werereticent about leaving their London base, and preoccu- short distance relocation, and few senior manage-

ment functions were decentralized to the regions. Ourpied with the practical difficulties of decentralization.This is consistent with the experience of Lyons who analysis questions Hardman’s trade-off between the least

cost location determined based on operating costs andreports:the alternative of a regional location based on need.

Discussions with departments suggested to me that there The analysis of operating costs demonstrates that todayare recurrent themes in Whitehall thinking that seem to it is possible to achieve substantial cost savings in aconstitute a kind of mythology about relocation, including variety of provincial locations by decentralizing eventhe beliefs that relocation works only for low-grade clerical relatively communications-intensive functions fromwork: that past relocations have been problematic; and that

Central London. The impact of inflationary pressuresin particular split headquarters do not work, with regionalclose to the capital on labour and property costs,sites perennially marginalised and senior staff spending theircombined with developments in information and com-lives on trains or quietly returning to London.munications technology and improvements in physical(L , 2004, p. 91)travel, have improved the economics of a provincial

Both managers and trades unions argue that easily location over the last three decades.relocated jobs have already been decentralized and However, the regional case for relocation can also beremaining staff are reluctant to move from the capital. made on a wider economic basis. Unlike a private firm,Fewer staff have mobility clauses in their contracts than the public sector is charged with considering questionswas the case in previous rounds of decentralization, and of equity, broader national resource costs and widerthey are more likely to leave their jobs rather than move benefits to the public ( J and T,to the provinces. Relocation may, therefore, lead to 1996). Such issues are more difficult to measure and aregreater disruption than in the 1970s and 1990s, and this frequently ignored in favour of the analysis of moremakes management reluctant to undertake large-scale obviously measurable operating costs. However, if themoves of sensitive functions over a short time scale. calculation of the costs and benefits of public sectorThe civil service trades unions are also anxious about relocation were based on such an analysis, then athe impact of relocation on their members in the regional location would look more attractive. Withcontext of simultaneous job losses associated with the high levels of unemployment, lower wages and propertyGershon review.8 The cooperation of trades unions prices (Table 10), a strong case for relocation to provin-with dispersal is dependent upon relocation being cial regions can be made based on spatial equity. Thevoluntary and redundancies being avoided, and this opportunity costs of investment in the public sector

(rather than in the private sector) are also clearly muchis less likely in the present climate of civil service

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Assessing

theC

asefor

PublicSector

Dispersal

779

Table 10. Key regional indicators

Govern-Business mentR&D establish- EstimatedFTE ment rental Average

employ- R&D FTE value gross House-Total ment as a employ- Govern- ‘investment weekly hold

GDP per per cent Business ment as a ment grade’ income ODPM disposable House-head GDP of regional R&D per cent of R&D offices per (£) per House- housing income hold ILO Un- Vehicles

(UKó per labour employ- regional employ- £/ft2 per house- hold statistics House (£) per disposable unemploy- employ- (000s) Conges-100), head force, ment labour ment annum, ERV hold, income (£), price head, income ment (%), ment per day tion

Region 1999 rank 1999 rank force, 2000 rank 2002 rank 2001 rank 2002 rank 1999 rank spring, 2002 rank per km rank

North East 75.9 9 0.23 9 0.00 9 12.15 7 380 9 69 813 9 9018 9 6.9 9 3.12 2North west 85.3 8 0.52 8 0.02 8 14.57 4 430 8 78 858 7 9501 6 5.5 6 3.85 6Yorkshire and

Humberside 86.3 7 0.25 7 0.03 7 14.06 5 432 7 76 368 8 9325 8 5.4 5 3.37 4East Midlands 91.9 4 0.65 6 0.04 6 11.04 9 449 5 87 280 6 9409 7 4.2 4 3.28 3West Midlands 90.1 5 0.40 5 0.10 4 15.66 2 462 4 97 650 5 9541 5 5.5 7 3.92 7East 114.2 3 1.05 4 0.13 3 11.09 8 510 3 127 858 3 10 638 3 3.5 1 3.66 5London 127.6 1 0.27 3 0.10 5 20.58 1 615 1 182 325 1 12 207 1 6.6 8 5.49 9South East 114.3 2 0.77 2 0.21 1 13.45 6 586 2 156 964 2 11 055 2 4.0 3 4.88 8South West 89.2 6 0.48 1 0.17 2 15.06 3 449 6 118 639 4 10 073 4 3.6 2 2.48 1England 100.0 0.54 0.10 496 119 563 10 284 4.9 3.70

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780 J. N. Marshall et al.

lower in provincial regions than in London and the and communications technology it is unsustainable toSouth East of England. Relocating mobile public sector argue that there is no local multiplier from the purchaseemployment from London and the South East will of goods and services. The consumer expenditureincrease demand in problem regions, reduce unemploy- multiplier associated with civil service relocation is onlyment and use under-employed factors of production in likely to be negligible in the extreme case of a smallsuch regions. Public sector investment can also act as a local economy with a skewed industrial struc-catalyst for private sector regeneration of run-down ture that does not benefit from local expenditureareas in provincial regions (E, 2004). Con- (E, 2004). The growing participation ofversely the more rapid growth in private sector service women in the workforce, the growth of white collaremployment in London and the South East, with jobs in regional economies for both sexes and theconsequent implications for overheating and inflation increase in career opportunities for women in middlein these regional economies, produces excessive demand ranks of the civil service (below grades 6 and 7)on infrastructure, and the pricing out of the housing have substantially changed regional public sector labourmarket of essential public service staff (Table 10). In markets. Today, Hardman’s view that new office jobsthese circumstances a rebalancing of civil service jobs are taken by economically ‘inactive’ women leavingaway from these areas would help redress regional blue collar males unemployed is outdated.imbalances and disparities as well as reducing the com- Regional income and employment multiplier modelspetition from the public sector for staff and resources estimating the impact of public sector relocation on thein London and the South East. It may release scarce local region take a less restrictive view than Hardman.skills to the private sector in overheated labour markets A and S (1982a, b) developed a modi-in the south of the country, and therefore contribute fied Keynesian multiplier to estimate the first roundto national economic growth (A and impact of the increased consumer expenditure associ-T, 1993). National monetary policy may also be ated with the proposed dispersals of the Propertyable to run at a lower level of interest rates if inflationary Services Agency (PSA) to Cleveland and the Ministrypressures close to the capital are reduced (E, of Defence (MOD) to South Glamorgan. This showed2004). the impact of dispersal on the local economy is critically

In so far as mobile public sector work supplies non- dependent upon the type of jobs involved in the move,local demand, it can be regarded as part of the export the numbers transferring from London and the numbersbase of the region. In this regard, it fulfils a role in the recruited locally. This model was applied to the actuallocal economy similar to that of private sector financial ODA relocation discussed above, where 43% of theand business service firms ( J and T,

posts were in administrative ‘mobile’ grades where staff1993). Employment multipliers from the consumption

can expect to move round the country. This is lowerof employed staff and purchasing of consumables andthan both the proposed MOD and PSA dispersals, andintermediate services by civil service offices are alsothis means the incomes of the dispersed civil servantssignificant. H (1973) took a narrow viewwere lower, which reduces local consumption expendi-of this aspect of the regional case for decentralizingture and the additional employment. Nevertheless, thegovernment work, arguing ‘there is little multiplier381 civil service jobs in East Kilbride increased short-effect from moving civil service jobs from London torun employment (ignoring the longer term impact onless-favoured economic areas’ (p. 6). He also stressedlocal authority expenditure) in Strathclyde by 436 (anthe high level of displacement associated with theemployment multiplier of 1.14). Long run impacts wererelocation of civil service jobs. Hardman argued thatestimated to be 10% higher. This estimate of the impactrelocation would have little impact on local unemploy-of the ODA dispersal on the local economy does notment because there was a mismatch between the white-include increased local purchases by the civil servicecollar employment dispersed from London in whichoffice. E (2004), as background research forwomen predominated (because it was more routinethe Lyons review, conducted a fuller analysis of theclerical work), and the blue-collar male unemploymentmultiplier impact (including indirect and inducedin destination locations. Thus, relocation would attractimpacts) of the Department of Social Security (DSS)/staff from existing employers bidding up local wageNational Health Service (NHS) Executive moves torates and damaging local competitiveness. Alternatively,Leeds and the Patent Office relocation to Newport,Hardman took the view that civil service dispersalderiving approximate estimates for regional input–out-would increase female activity rates and bring a ‘hiddenput tables from location quotient data. This confirmsfemale labour reserve’ (p. 38) into the labour market.the importance of the size of the local economy. TheThis was arguably an over-simplification of the contri-analysis suggested a short-run multiplier of 1.4 for thebution of the civil service to regional economies in thehead office moves to Leeds and 1.2 for Newport, which1970s, but it would be regarded as inappropriate today.was reduced to 1.3 for Leeds and 1.0 for the smallGiven the growth of subcontracting in the civil service,Newport economy when local displacement was takenincluding catering, cleaning and security, and the

increasing reliance of the civil service on information into account. These results are consistent with the

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Assessing the Case for Public Sector Dispersal 781

estimates of local multipliers in a range of impact studies whether they live and work in the cities or simplyuse them for leisure and consumption (P , 1997;(E, 2004).

L (2004, pp. 31–44) acknowledges both these W , 1997; A and T, 2002). InBritain, problem regions lack this vibrant service ori-direct economic impacts of public sector relocation

on employment and the knock on effects on local ented economy in and around major cities. This meansnot just that the cities suffer from economic weakness,communities. He is less confident about the connection

between dispersal and the ‘softer’ sides of the regional with implications for the concentration of severe un-employment and social disadvantage, but also that theproblem, including factors such as knowledge, innova-

tion and learning, instead pleading the need for further surrounding areas are constrained in their ability tothrive. Some smaller towns survive well as centres ofresearch (p. 31). Vexing though it may be for policy-

makers, new approaches to urban and regional growth affluent commuters and through the location of a fewlarger employers, but for former industrial areas thehighlight the complexity of regional problems, indicate

there is no simple received wisdom on the economic absence of local dynamism is compounded by a rela-tively weak supply of services from the cities. Breakingand social factors promoting regional learning, adapt-

ability and development, and highlight no single into this cycle of disadvantage requires a strengtheningof the service base by the provision of high status publicregional policy solution (A , 2003; S, 2003).

Recent accounts rooted in institutional sociology stress sector jobs within provincial cities, but again to besuccessful such a policy requires an appreciation ofthe ‘embeddedness’ of economic action and the way in

which networks and reciprocal associations between the complexity and interdependent nature of regionalproblems.firms enable information sharing and mutually bene-

ficial cooperation (M , 2003). This insight hasbeen extended to develop local economic development

Possible negative impacts of relocationstrategies based on innovative clusters of firms in relatedindustries. A (2004, p. 54) is critical of such cluster Little attention has been paid in previous research to

potential negative impacts associated with public sectorpolicies, but argues more broadly that:relocation. These include the fact that increased demand

the scale and density of ‘intelligent’ people and institutions, in destination regions may increase property and labouras reflected in the skill and professional profile of the prices. Growth in the non-market sector may crowd outlabour market, the volume and quality of training and the private sector and have negative impacts on enter-education across different levels, the depth of linkage

prise and initiative in the local economy. The increasedbetween schools, universities, and industry, the qualitydependence of a regional economy on the public sectorand diversity of the information and intelligence betweenalso makes it more vulnerable to reductions in govern-economic agents and their wider environmentment expenditure. It is certainly the case that depend-ence on the public sector means that areas are vulnerableare all important sources of regional knowledge, exper-

tise and adaptability. Civil service relocation can play a to reductions in government expenditure as numerousareas found to their cost during 1979–97 (Mrole in helping to upgrade such economic, institutional

and social bases of problem regions. Problem regions et al., 1999). Public sector call centres, an importantsource of new jobs in peripheral areas in recent yearsare over-dependent on declining manufacturing sectors

and in recent years have experienced growth rates in (B et al., 2000), are like their private sectorcounterparts in principle vulnerable to transfer overseas.knowledge intensive functions that are substantially less

than those of London and the South East (C To date no government call centres have moved abroad,though 45 call centres are contracted to the private sec-et al., 1999). The relocation of higher-level civil service

jobs can enhance the skill and knowledge base of the tor to manage and this could ultimately result in thetransfer of activity offshore. In evidence to the Hregions, and thus ultimately increase productivity and

economic growth (I , 1996), especially when C C P A(2003, p. 15), the Passport Agency and the Environmentconnected to wider strategies aimed at enhancing

regional competitiveness (S, 1997). However, Agency, both of whom outsource their call centres,claim that there is no risk of the private contractor decid-there are inevitably limits to the impact of small numbers

of public sector jobs on large regional economies, and ing to base them overseas because the location of out-sourced call centres has to be agreed with them.as argued above dispersed public sector offices have

displayed a truncated occupational profile. The focus However, Siemens, which runs a call centre on behalfof National Savings, has recently negotiated a transferpost-Lyons needs to be on attracting and equally impor-

tant embedding substantial higher-quality public sector of functions off-shore,9 and such leakage will clearlybecome more of an issue in the future. In contrast, theinvestment in problem regions if wider impacts on

adaptability and growth are to be achieved. view that expanding the public sector reduces theentrepreneurial capacity of problem regions reflects aPublic sector employees can also add to the profile

and dynamism of provincial cities as centres of creative misreading of the nature of their under-development.Here public sector growth provides a palliative for theand cultural industries, consumption and distribution,

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782 J. N. Marshall et al.

long-standing under-performance of the private sector take account of the potential negative impacts on originthat has resisted the regional policies of successive areas. This is again a relatively neglected area of research.governments. Today, the emphasis from government on It is clear, however, that though relocation is usuallyimproving public sector efficiency and the adoption of taken to meet employers’ business needs it has significantprivate sector practices also means it is more difficult to impacts on the individuals involved, their families andsustain the notion that the public sector is inherently through them the origin economy. Research shows thatinefficient. In any case, any potential problems may be today those involved in relocation have a wider rangemitigated where the number of mobile public sector of living arrangements and a greater diversity of familyposts is small relative to the size of the regional economy. circumstances than in previous rounds of civil serviceNegative outcomes are likely to be swamped by the dispersal, and partners’ employment has become a morebeneficial effects of increased employment opportuni- prominent issue (G and C, 2003). Thisties ( J and T, 1996). appears to confirm the earlier suggestion in the paper

Nevertheless, following Hardman, Lyons is con- that more staff will be reluctant to move than incerned that expanding public sector clusters in provin- previous rounds of relocation and it will be difficult tocial areas risks a danger of ‘crowding out’ private sector enforce mobility clauses in contracts.employers by bidding up local wages and causing local Here Lyons accepts the received wisdom that in thedisplacement. To combat this problem he proposes long run, moving jobs from London and the South Eastaligning public sector salaries more closely with local is unlikely to have significant negative consequences forlabour market conditions by introducing greater flexi- these areas due to the tightness of the labour andbility in public sector wages, and this conclusion ties in property markets and the attractiveness of these areaswith the Chancellor’s preference for regional pay in the for new investment in finance, business and creativecivil service. Such thinking on the interrelationships services (B et al., 2003). Relocation can avoidbetween local pay and relocation in the civil service undermining London’s international position as a fin-needs further clarification. In so far as the movement ancial and corporate headquarters centre by retainingof civil servants from London and the South East is in the capital civil service offices that such organizationsbeing proposed the normal arrangement (in previous find attractive. The significant growth of professionalrelocation exercises) is for relocated staff to retain their white collar jobs, together with long-term blue collarLondon or South East salary weighting, which remains job loss, has left London with high levels of incomefixed and is eroded over time by annual salary incre- inequality, and pockets of unemployment and socialments. This practice is likely to be retained because it deprivation particularly in the east of Inner Londonwould be impractical to encourage staff to move and

(H , 2003). Despite the high levels of economictake a pay cut at the same time. Where the movement

growth, and extensive development pressures, the Southof posts is proposed they are paid the rate for that jobEast is a diverse region with pockets of unemploymentas determined by existing pay scales (though it may beand deprivation across Kent and in coastal urban areaspossible to employ staff in the provinces on lower grades( J et al., 2002). This suggests that decentralizationthan in London). So aligning mobile jobs in the civilof government work should be selective and tactical. Itservice with wages in the local labour market requiresshould be selective in the sense that it recognizes thataltering wage rates in the relevant agency or department,there may be a clear case for certain functions to remainbecause pay in the civil service is delegated to the agencyclose to London. Relocation should focus specificallyor departmental level. There is already considerableon those segments of the London labour market wherevariability in salary levels between agencies and depart-the public sector is experiencing the greatest difficultiesments, which take account of differences in labourof operation. Both origin and destination regions aremarket conditions, though these are not specific to onemore likely to benefit from the relocation of morearea. Leaving aside such practical considerations, thesenior staff because the public sector finds it particularlybidding up of local salaries by the introduction of publicdifficult to attract and retain such staff due to thesector work assumes a tight labour market. Such analternative employment opportunities in London andassumption appears to derive from Lyon’s desire tothe South East (E, 2004). While destinationcluster relocated jobs in selected provincial cities, but iflocations will also benefit because these staff increasea regional approach is adopted to clustering civil serviceconsumer income multipliers and reduce the likelihoodjobs this is likely to be less of a problem. Finally, ifof ‘crowding out’ because such staff are under-repre-greater wage flexibility means in effect reducing publicsented in provincial regions. Relocation should also besector wages in problem regions, it will have a negativetactical in that it should focus on ‘hot spots’ in theoverall effect on regional growth where civil serviceSouth East regional economy rather than encouragedemand for labour is inelastic (which may be likely inrelocation from across the region. It should also avoidthe present climate of staff reductions) and this couldrelocations from labour markets in London and theoutweigh any reduction of displacement effects fromSouth East where there is high unemployment, andrelocation.

The relocation of public sector work also needs to social deprivation.

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Assessing the Case for Public Sector Dispersal 783

RELOCATION AND from groups within the political parties, social partners,MODERNIZATION OF THE PUBLIC the civil service and the government itself (W ,

SECTOR 2004). There is also a danger that breaking up the civilservice in this manner will reduce the effectiveness ofThough a strong regional case can be made for thegovernment by reducing the connections between therelocation of public sector work from capital cities, andheadquarters of government departments (L ,the regional benefits of relocation feature more strongly2004, p. 91). Nevertheless, retaining strategic functionsin L (2004, pp. 31–43) than Hardman, the organ-in London, as Lyons proposes, does not need to includeization and reform of the civil service remains a morethe operational functions of government, nor largesignificant influence on dispersal. On the one hand, itnumbers of specialist, advisory and a policy jobs or ais the highly centralized and strongly hierarchical naturewide range of arm’s length bodies which are moreof the civil service, where both officials advising minis-sensibly located in the regions. However, whether theters, senior administrators in departments concernedLyons dispersals will achieve the envisaged ‘sustainablewith policy delivery and their staff are all concentratedlocations’ of civil service work will depend critically onnear London that has produced the growth in demandthe strength of the commitment to the regional agendafor civil service labour close to the capital. Spatialat Westminster. There must be concern that the Lyonsrelocation has been used to ‘accommodate’ organiza-review does not present a clear vision for the regionaltional centralization (W , 1989). It has beencivil service to match its notion of a strategic core infacilitated by the degree of hierarchical–functionalthe capital.specialization within the civil service that allowed parts

Since the 1970s, government has been moreto operate quite effectively away from the capital.interested in ‘transforming’ the public sector by control-Nevertheless, the spatially centralized and hierarchicallyling expenditure and reform rather than relocationorganized civil service, combined with buoyancy in the(W, 1989). This coincided with an ideologicalprivate sector in London and the South East, still actsdistrust of ‘big government’ and a desire to redrawas a brake on staff mobility and the effective deploymentthe boundary between state and non-state activities,of staff in the national public service. London acts as antogether with the emergence of so called ‘New Public‘escalator’ region attracting civil service staff from theManagement’, with a stronger emphasis on cost cutting,provinces as they rise up the promotion ladder. Sub-target setting, performance appraisal and a shift towardssequent mobility for such staff is then more likely closea more diverse, organizationally distinct and market-to the capital where the job opportunities are greater.orientated public sector (H , 1991, 1996;However, it is becoming more difficult to attract staffC and N , 1997; N, 2001).to the capital because of the high costs of living inRelocation returned to the political agenda at the endLondon and the South East. Specialist and professionalof the 1980s in spite of these trends because thecivil servants in London are difficult to retain becauseunbalanced growth in the private sector of the economyof the availability of alternative job opportunities in therestricted the operation of the public sector close toprivate sector near the capital. The spatial separation ofLondon. Under Lyons public sector relocation andmany junior and senior functions also means that it isreform have become more closely linked and ‘futuremore difficult to promote through the ranks in London.dispersals from London and the South East . . . are likelyIn the regions, mobility within and between depart-to be part of bigger reforms which also transform thements is restricted by the lack of regional opportunitiesnature, organisation, productivity and size of publicabove the junior ranks in the civil service. This arguesservice functions’ (L , 2004, p. 5). New Labourfor the promotion via relocation of more ‘sustainablehas taken on-board central features of the Conservativelocations’ of civil service work in provincial regionsmanagerial reforms of the 1980s and 1990s, but theirthat contain a fuller occupational pyramid. Over-time,version of the ‘managerial state’ encourages joined-upthis could mark a move towards a stronger regional civilnetworks that help the public sector to work togetherservice, if the growth of more senior grades outsidein the interests of the user (N , 2000). ThoughLondon were linked to the creation of centres ofNew Labour may have taken a step back from thespecialization or expertise in the civil service outsideexaggerated faith in the market that characterized thethe capital, akin to the regional structure that is oftenTory years, it is on-message with G andfound in large devolved accountancy or consultancyO ’s (1993) thesis suggesting the need toorganizations. While establishing a stronger regionaldevelop a more innovative and entrepreneurial publiccivil service is similar to the multinodal view of Britainsector. Characterized as modernization or renewal thisenvisaged by A et al. (2003), calls for governmentemphasizes the need to update public institutions thatdepartments to be relocated in their entirety out of theare viewed as resistant to change (P Mcapital to a number of separate locations are regarded C O, 1977). Thus, the Lyons reviewby L (2004) as unrealistic. Certainly, the experi-is presented as a catalyst to bring about organizationalence in Ireland where proposals to relocate departmentaland technological change in the public sector. Reloca-headquarters from Dublin were put forward by govern-

ment, is that they have met with considerable resistance tion provides ‘the spur for new ways of working:

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784 J. N. Marshall et al.

adopting better business practices, processes and tech- Wales and moving from one form of organization toanother (O , 2003).nology, and reforming organisational culture’ (L ,

The position in the English regions is obviously less2004, p. 5). Extending the separation of policy andadvanced, but public sector relocation could contributedelivery underpinning the agency reforms of the 1990s,to a similar process of building up the capacity andLyons connects relocation to a long-term attempt toupgrading the skills of the regional civil services in Eng-create a slimmer more strategic headquarters for the civilland. Chapter 2 of the White Paper Your Region, Yourservice in London by relocating senior civil servants. InChoice proposes additional administrative devolutiona significant break with one of the nostrums of Newprimarily to Government Offices, especially in the fieldPublic Management established in the 1990s, whereof policy development and ‘joining up’ activities at theautonomy was delegated to departments and agenciesregional level. These new responsibilities represent athat were left to run their own business, collaborationchallenge for the English regions, and could require ais proposed between departments to share transactionstrengthening of the regional tier of the civil service.services, back offices, human resources or payroll andResearch by CURDS has highlighted the need to buildco-locate these outside London and the South East.up skills and respond to capacity shortages within theThus, the primary emphasis in the current round ofexisting structures of regional governance in Englandrelocation would appear to be efficiency savings and(T and H, 2001; T, 2003).associated public sector reform.The traditionally highly centralized system of policy-In contrast, Lyons displays a blind spot with regard tomaking in England means that much of the capacity andthe connections between public sector relocation andmany of the skills required to successfully operate thewider institutional arrangements at the regional level.new architecture of regional governance are more likelyJ (2002) has graphically illustrated the changingto be located in Whitehall than the regions themselves.nature and contested character of state hierarchies and

The relocation of civil service jobs could also bolsterorganization at the local level in which developmentgovernance capacity at the regional level in ways whichagencies, entrepreneurial cities and other local insti-bring government closer to the people in order totutions jostle for economic advantage. Institutionalimprove policy outcomes. The Rural Delivery Review,approaches to regional development also alert us to thechaired by Lord Haskins, has strongly emphasized thefact that in old industrial regions institutional short-role of administrative devolution in making servicescomings may be an important part of the regional prob-more transparent and accessible to rural businesses andlem, where ‘institutional sclerosis’ or ‘institutionalcommunities, and visitors to the countryside. Haskinsthinness’ acts as a block on innovation and adaptivenesshas also called for simplification of the complex range

or encourages ‘path dependence’ and ‘lock in’of agencies currently engaged in delivering the govern-

(M , 2003; A , 2004). At the minimum, ment’s rural policies and for better coordination of therelocation of government work needs to work with the environmental, social and economic elements of ruralgrain of local institutional arrangements and arguably delivery at a regional level. The Haskins review implieswhere relevant promote institutional reform. At the a radical regionalization of the Department of theoutset, the Lyons review posed the question, is it Environment, Food and Rural Affairs (DEFRA).possible to connect relocation and a shift towards flatter While the focus of these recommendations is ruralmore dispersed forms of governance, and will a less policy, the principles could be extended across a rangecentralized civil service promote better public sector of policy functions, especially those scheduled to beoutcomes? Though this is another issue at the edge of devolved under the terms of Your Region, Your Choice.current academic understanding, it is clear devolution Such a change would also respond to the Government’shas had a profound impact on the civil service and local own research, such as the P andemployment in Scotland (MQ , 2001). Of more I U report Reaching Out: The Role ofinterest from an English perspective is the Welsh situa- Central Government at the Local and Regional Level (2000),tion, because Wales has neither the same tradition of which suggested that greater coordination of govern-independence, nor has it been granted the same auto- ment activity at the regional level, could lead to betternomy as Scotland. Since 1998, civil service numbers in public policy outcomes. However, Lyons merely con-Wales have increased as a consequence of the expansion fines his remit to providing an efficient regional civilof new responsibilities and mergers with existing bodies. service administration, and holds out the prospect thatThere has also been a shift from a purely administrative relocation might possibly be used to strengthen thecivil service to a service with a greater policy concern Government Regional Office.and requiring more local knowledge. More tentatively,it appears a more independent Welsh civil service is

CONCLUSIONSdeveloping a stronger emphasis on local recruitment andcareer trajectories (as is also found in Scotland). Over Public sector dispersal from capital cities is a recurringtime it is envisaged that Wales will develop a cadre of theme in many countries, but it is an issue that has

received only intermittent academic attention. Thecivil servants with experience of the public sector in

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Assessing the Case for Public Sector Dispersal 785

paper uses evidence submitted to the Lyons review of the Wales following the establishment of the Welsh Assem-bly suggests that if public sector relocation was used tocase for public sector relocation from London and the

South East of England to conduct a state-of-the-art anal- promote the development of a stronger regional civilservice, this could change the dynamics of the civilysis of academic research in this area. It demonstrates the

concentration of the more senior staff in the civil service service. Relocation could contribute to a similar processof building up the capacity and upgrading the skillsand related parts of the public sector in London. Previous

relocation of the civil service from the capital has not of the regional civil services in England. Thisstrengthening of the regional tier of the civil serviceameliorated this problem because it has been a short-

term cyclical response to increases in property prices and would respond to the agenda set by the Performanceand Innovation Unit, which suggested the need forthe tightening of the labour market in the capital. Since

1963, approximately 69 000 predominantly more junior stronger joining-up of functions at the regional level.Based on this analysis, we argue for a centrallyjobs have been relocated largely from London to the

regions, and these numbers have been quite small relative coordinated and funded, long-term, strategic approachto civil service dispersal from capital cities. This oughtto the scale of regional disparities in Britain. The pattern

of relocation has reflected the availability of savings in to be more than a one-off relocation exercise, butshould also initiate a process of organizational changeoperating costs (primarily labour costs and office rents)

that can be achieved from relocation from London. We in government. Relocation to provincial regions shouldinclude significant numbers of senior management staffhave updated existing research and show that today civil

service relocation could achieve significant financial sav- and not just blocks of routine clerical work. It must beselective and tactical to avoid potential negative impactsings in a variety of provincial locations, even for the relo-

cation of a communications-intensive head office. The on the origin location. It should also focus on thoseoccupations where the civil service is experiencing thegeography of locational costs has changed since the

1960s and 1970s; it is necessary to go further out from most serious local recruitment difficulties. There oughtto be a presumption in favour of locating all new civilLondon to achieve the greatest cost savings (beyond

approximately 80 miles). service activities away from the capital. Relocationshould be consistent with and help support widerHowever, we stress the analysis of the relocation of

public bodies should be based on a wider economic regional development strategies. Public sector reloca-tion could also be used to promote more ‘sustainable’analysis than simply operating costs; there is a strong

regional case for relocation of the public sector from locations of civil service work in provincial locationsby developing a fuller occupational pyramid. A strongercapital cities. The concentration of the public sector in

London and the South East contributes to regional regional civil service should be developed aroundexisting centres of specialist expertise in the moreimbalance in the British economy with more rapid

economic growth close to the capital, which produces devolved agencies with head offices in the regions. Overtime this could offer a counterweight to centralization insimultaneous overheating in these regions and under-

utilization of infrastructure and human resources else- London and help to make relocation from London evenmore economic by reducing the dependence of thewhere. Relocating mobile public sector employment

can increase demand in problem regions, reduce un- service on the capital.The Lyons review proposed a centrally coordinatedemployment and use under-employed factors of pro-

duction. A shift in the public sector from London and programme of relocation to slim down the Whitehallheadquarters of the civil service linked to expandingthe South East can also free up some capacities in

those areas and reduce inflationary pressures there. clusters of civil service employment in large provincialcities (L , 2004). Strategic guidance is to provideRelocations involving a significant number of profes-

sional and senior administrative jobs could help to ‘rules’ to underpin the relocation programme and indi-cate the pattern of public sector location the governmentbolster public sector skills and institutional capacity in

the regions. There are also important multiplier effects is trying to achieve. The Lyons proposals are a stepforward because they seek to break with the cyclicalon consumer expenditure and increased local purchas-

ing of goods and services associated with public sector relocation of routine jobs from the capital, but it isuncertain whether its proposals will be robust enoughrelocation. Taken together, this evidence suggests that

dispersal of the public sector can contribute simulta- for a long-term task. The final outcome of the Lyonsreview will be strongly influenced by the Efficiency andneously to national economic growth, and to reducing

differences in growth rates between the regions. other Reviews designed to improve public servicedelivery. Regional agendas appear again to be takingThe organizational–hierarchical centralization of the

civil service underpins the concentration of the civil second place to issues of civil service organization andreform as far as public sector relocation is concerned.service near the capital, and combined with the over-

heating of large parts of London and the South East, it The government is seeking to reduce administrativecosts in the civil service and ensure that increases inmeans it is difficult for the public sector to attract and

retain staff because of the high costs of living there. public expenditure are more directly reflected in front-line services. In this context, relocation in Lyons isEvidence from the evolution of the civil service in

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786 J. N. Marshall et al.

(RDAs) to the Lyons review of Public Sector Relocationprimarily seen as a means of introducing new more effec-from London and the South East. The views expressed aretive business practices. Whether significant centralthe authors and not the RDAs.funding will be provided to facilitate relocation is

unclear, but relocations will be conducted in the contextNOTESof tight control of central government expenditure. This

suggests that, as in the 1990s, relocations may create ‘hot 1. See http://www.hm-treasury.gov.uk/consultations_and_spots’ of growth in the context of slow growth or even legislation/lyons/consult_lyons_index.cfm (all websitesdecline in civil service numbers elsewhere. were accessed in September 2004).

2. See http://www.citep.gouv.frDespite the more positive regional rhetoric in Lyons,3. See the report to the Finance Committee of the Scottishthe first tranche of proposed relocations contains few

Parliament atlarge moves, and an emphasis on the movement ofhttp://www.scottish.parliament.uk/business/routine posts. The location of these proposed movescommittees/finance/fic04-01/fic04-01-00.htm)appears to be strongly influenced by the existing centres

4. See http://www.scottish.parliament.uk/business/of expertise in the civil service because departments committees/finance/ and http://www.wales.gov.uk/believe it makes sense to put similar functions together themesbudgetandstrategic/content/relocation/contents-and they want to reduce spatial fragmentation within ehtm#Contents, respectively.their organization. Thus, the geography and character 5. See www.mlit.go.jp/kokudokeikaku/daishu/English/of the proposed relocations does not look much er_001.html

6. Note that data on employment published in Civil Servicedifferent to relocations in the 1990s. If government isStatistics include both non-industrial and industrial civilto relocate successfully more senior functions fromservants (which are declining nationally), but excludeLondon, it will need to overcome the reluctance ofemployment in many public sector bodies sponsored bysenior civil servants to work outside the capital.departments. This probably means that growth of white-collar employment since 1997 in the capital is under-estimated (L , 2004, pp. 45–54).

Acknowledgements – The authors acknowledge the very 7. See http://www.documentsonline.nationalarchives.gov.helpful comments of two referees; the normal disclaimer uk/about.aspapplies. The paper draws on evidence submitted by CURDS 8. See www.pcs.org.uk

9. See http://www.pcs.org.ukon behalf of the English Regional Development Agencies

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