Consultant McKinsey advised the Cabinet Office that around 60,000 civil service and wider public-sector roles could be relocated from London and the South East under the Places for Growth programme, a just-published internal report from 2018 has revealed.
The government’s current target for Places for Growth is to relocate 22,000 roles away from London and the South East by 2030, a mission the Cabinet Office said passed the half-way stage back in February. However, despite the 11,000-plus relocations to date, civil service headcount in the capital has continued to grow in recent years, according to official statistics.
Places for Growth launched in 2018 with a pledge that “thousands” of jobs would be moved, but the 22,000 figure did not emerge until early 2020.
This week, parliament’s Public Administration and Constitutional Affairs Committee published a previously-unseen report to the Cabinet Office by McKinsey & Company, which was supporting the Government Property Unit on the development of Places for Growth five years ago.
It was supplied by parliamentary secretary to the Cabinet Office Alex Burghart following his appearance before MPs on the committee as part of their inquiry into government’s planning for its future estate needs.
As well as the capital, the report’s 60,000 figure for relocatable jobs included roles in Bedfordshire, Berkshire, Buckinghamshire, Essex, Hampshire, Hertfordshire, Kent, East Sussex and West Sussex. The report noted that although the ballpark figure included non-civil service roles, those “in scope” for Places for Growth were likely to be “predominantly” civil servants.
In his most recent interview with Civil Service World, Cabinet Office permanent secretary Alex Chisholm – who is also chief operating officer of the civil service – hinted at the potential for Places for Growth’s target to be ratcheted up.
“I think we might be victims of our success there and I expect that the appetite will go up in terms of the number of roles to be relocated,” he said.
McKinsey projected savings of £260m to £810m from Places for Growth over 12 years, based on 60,000 relocations. Factors influencing the quantum of savings included the pace at which the moves were conducted.
The report suggested a “progressive” model in which role relocations were conducted over an eight-year period would mean no redundancies in London and the South East were required because “natural wastage” in the labour market could be “leveraged”.
McKinsey said an “accelerated” model, in which relocations were conducted over three years would entail a redundancy rate of 75% and additional “double run” costs for staffing and property in multiple locations.
The report also included an analysis of the benefit to the economies of big regional cities. It said a public body relocating 5,000 jobs to Manchester could increase the city’s gross-value-added income by 8%, or £2.35bn. The figure for Birmingham was 9%, or £1.91bn.
In his accompanying letter to PACAC members, Burghart said officials had worked on the assumption that “approximately 50%” of an employee’s salary contributed to the local economy.
“Economic benefit is determined to be the gross value added (GVA) of the role to the regional economy,” he said.
“At the start of the programme we used assumptions to calculate the potential economic benefits of the Places for Growth programme.
“Officials assumed 30% of salary as tax and removed a further 20% to counteract a possible negative GVA impact on the London economy. This leaves 50% of salary costs as GVA economic benefit.”
Burghart said a minimum of 50 roles was required to “begin creating economic benefit”.
He added that the Cabinet Office is planning to conduct an interim evaluation of the “effectiveness and impact” of the Places for Growth programme over the summer.
“We expect this work will be concluded by autumn 2023,” he said.