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LEVELLING UP

Time to move out: The case for civil service relocation

Ministers’ efforts to relocate large numbers of civil servants out of London are going backwards. Why we need bold steps to accelerate civil service dispersal to both level up economic growth and change the culture of government decisions, and how to do it.
Will Tanner, Adam Hawksbee
February 8, 2022
Time to move out: The case for civil service relocation
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"This is a valuable report, which highlights the further work still needed to move more of our people out of London as we focus on levelling up."

Eddie Hughes MP, Parliamentary Under-Secretary, Department for Levelling Up, Housing and Communities

 

Ministers have made all the right noises on civil service relocation but now urgently need to meet those words with action.

The Government’s desire to “level up” economic opportunity and govern in the interests of historically left-behind areas is being undermined by slow progress in moving large numbers of civil servants out of Whitehall.

Our analysis shows that, despite bold ministerial commitments, ambitions to radically alter the footprint of the civil service are faltering. This is particularly true of market-facing parts of government, including economic departments, regulators and commercial functions. For example:

  • Since 2018, one in three civil servants has been recruited in London, meaning the number of civil servants has grown twice as fast in London (22%) than regions outside the capital (11%).
  • More than 9 in 10 civil servants employed by HM Treasury and the Department for Business, Energy and Industrial Strategy work in London. In the six months after the announcement of the new Northern Economic Campus in March 2021, these departments hired nearly three times as many officials within London as outside.
  • Government commercial functions such as the Government Digital Service, and UK Export Finance are all headquartered in Whitehall or the City – which may explain why London-based companies are awarded twice the value of government contracts and twice as much trade finance support as companies outside London.
  • Since 2006, overall civil service headcount has risen by 50% in London, compared to 3% for the country as a whole. In the North East, East of England, South West and South East, numbers have fallen by 12% or more.
  • Nearly two thirds (65%) of Senior Civil Servants are based in London, up from 60% in 2015. This means that London has 5 times the share of senior officials as other UK regions. In 2021, 41% of applicants to the Civil Service Fast Stream were from London and the South East and 47% of those recommended for appointment were from the same regions. 

The evidence shows that moving civil servants to other regions could have a positive effect on growth and decision-making. Onward finds that previous relocations have generally had a “multiplier effect” on private sector jobs and growth in their destination location. This includes the Office for National Statistics, whose move to Newport from 2005 is often cited against relocation. Onward finds that, since the ONS move Newport has experienced a faster pace of knowledge-intensive jobs growth than cities including Leeds, Newcastle, Sheffield and Birmingham.

 

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Problems

Recommendations

  • Despite successive attempts by multiple administrations, the civil service today is nearly as London-centric as it was 45 years ago. In March 2021, 22% of UK civil servants worked in London, compared to 23% in 1976. More than 100,000 full-time equivalent civil servants are now based in the capital, up from 86,600 when Labour swept to power in 1997. In London, there are more than 3 additional civil servants per 1,000 employees and more than 5 more officials per 1,000 working-age adults compared to the average for other English regions.
  • Many of the Government’s most important market-facing functions are located in Whitehall or the City, undermining efforts to level up growth elsewhere in the UK. This may be one reason why London-based companies are awarded twice the value of central government contracts and are twice as likely to benefit from trade finance and insurance from the UK Government.
  • In the three years between March 2018 and March 2021, the number of civil servants grew by 54,740 overall, driven by rising public spending, Brexit and the pandemic. A disproportionate share of this growth – 34% – has been in London, compared to 23% in the North of England, 10% in the Midlands and 34% elsewhere.
  • Excluding Ofwat, every economic regulator and most commercial functions of government, such as the the Government Digital Service and UK Export Finance, are headquartered in Whitehall, the City or Canary Wharf.
  • Relocate government commercial functions out of London, including the Government Digital Service, Crown Commercial Service, UK Export Finance, and Advanced Research and Invention Agency.
  • Publish departmental league tables of civil service relocation to boost accountability, with a new “one-in-two-out” rule for departments that miss their projections, where they cannot advertise for a London-based role until two roles have been relocated or recruited outside. 
  • Expand the network of regional civil service campuses, alongside a commitment that ministers and Permanent Secretaries should work from them at least one day a week or one week per month, with annual reporting based on official diaries. 
  • Review the location of regulators, such as Ofcom, Ofgem, the Financial Conduct Authority, and the Competition and Markets Authority, to ensure they reflect the economic geography of the industries they regulate.

Problems

  • Despite successive attempts by multiple administrations, the civil service today is nearly as London-centric as it was 45 years ago. In March 2021, 22% of UK civil servants worked in London, compared to 23% in 1976. More than 100,000 full-time equivalent civil servants are now based in the capital, up from 86,600 when Labour swept to power in 1997. In London, there are more than 3 additional civil servants per 1,000 employees and more than 5 more officials per 1,000 working-age adults compared to the average for other English regions.
  • Many of the Government’s most important market-facing functions are located in Whitehall or the City, undermining efforts to level up growth elsewhere in the UK. This may be one reason why London-based companies are awarded twice the value of central government contracts and are twice as likely to benefit from trade finance and insurance from the UK Government.
  • In the three years between March 2018 and March 2021, the number of civil servants grew by 54,740 overall, driven by rising public spending, Brexit and the pandemic. A disproportionate share of this growth – 34% – has been in London, compared to 23% in the North of England, 10% in the Midlands and 34% elsewhere.
  • Excluding Ofwat, every economic regulator and most commercial functions of government, such as the the Government Digital Service and UK Export Finance, are headquartered in Whitehall, the City or Canary Wharf.

Recommendations

  • Relocate government commercial functions out of London, including the Government Digital Service, Crown Commercial Service, UK Export Finance, and Advanced Research and Invention Agency.
  • Publish departmental league tables of civil service relocation to boost accountability, with a new “one-in-two-out” rule for departments that miss their projections, where they cannot advertise for a London-based role until two roles have been relocated or recruited outside. 
  • Expand the network of regional civil service campuses, alongside a commitment that ministers and Permanent Secretaries should work from them at least one day a week or one week per month, with annual reporting based on official diaries. 
  • Review the location of regulators, such as Ofcom, Ofgem, the Financial Conduct Authority, and the Competition and Markets Authority, to ensure they reflect the economic geography of the industries they regulate.

Endorsements

Andy Street, Mayor of the West Midlands:

“The effort to redistribute civil service jobs has been vexatious for decades. However given the political commitment to “Levelling Up”, finding a way to do this well is now both urgent and important. Bringing together the brains of Departments with businesses in critical sectors, as has been done in the housing industry through DLUHC’s second HQ in Wolverhampton, is a model we need to see far more often. This report carefully describes just how much more is still to be done. It should be a real ‘call to action’.”

Jamie Driscoll, Mayor of the North of Tyne:

“If levelling up feels like rowing against the tide, it’s because all the big decisions still happen in London. When places like Newcastle see ministers, it’s in hard hats for photo opportunities.

“We’ve proven that regional Mayors are good at creating jobs and landing investment. If we had ministers working here for a week every month, we’d finally be in touching distance of joined up government that can deliver levelling up. The proposal to have senior civil servants based in areas like the North of Tyne is sound. It’s better value for money for taxpayers – top quality office accommodation is a fraction of the price it is in London. Civil service relocation must include the top officials, not just the back-office admin staff.”

Miriam Cates, Member of Parliament for Penistone and Stocksbridge:

“Where civil servants work matters to our economy and our culture. There is no practical reason why decisions about health spending or taxation need to be made in Whitehall and not in Sheffield. In fact, Government will make better decisions if those developing policy are exposed to the challenges of the entire country, rather than the issues that matter to London. We need to accelerate civil service relocation to support the Government’s ambitions to level up.”

Jo Gideon MP, Member of Parliament for Stoke-on-Trent Central:

“This important report makes clear that there is still much work needed for government to deliver on its commitment to spread clusters of high level civil service jobs across the country. It illustrates that to rebalance the UK’s economic geography we must bridge the cultural differences and values between government decision makers and those affected by those decisions.

“Only by being based in areas of the country like Stoke-in-Trent with the biggest challenges can those making spending decisions hope to fully understand the impact of policies on those areas. Delivering equality of opportunity, one of the key pillars of the levelling up agenda, depends on the success of a fair, comprehensive relocation strategy.”

Peter Gibson MP, Member of Parliament for Darlington:

“As the MP for Darlington I am delighted that Treasury, DIT, BEIS, ONS and CMA are locating parts of their teams to Darlington in addition to the existing DFE roles in my constituency. Providing real opportunities to go far but stay local is a key element of our levelling up agenda and Darlington is quickly becoming a poster child for the revolution that our Government is implementing as we build back better. Good progress has been made, and this report shows how important it is that we redouble our efforts on this agenda.”

This report is part of Onward’s Levelling Up programme, which considers way to reduce the UK’s longstanding regional disparities and bring opportunity to places that have been left behind.

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