The decentralisation debate: public servants just won’t move

By David Donaldson

Thursday July 17, 2014

The public sector union says talk of shifting departmental staff out of Canberra is “playing postcode politics”. And state government examples warn of the dangers.

Abbott government frontbencher Eric Abetz, the Minister Assisting the Prime Minister for the Public Service, indicated in June he was considering a decentralisation plan to shift workers and prop up struggling regional economies. Independent MP Andrew Wilkie immediately put up his hand for Hobart, amid criticism from Labor and the ACT government over potential inefficiency and the impact on Canberra’s economy.

At a state level, New South Wales is looking for space to rent for its public servants in the outer western suburbs of Penrith and Liverpool. Victoria has driven much of its public sector to regional areas — with more to come — offering a case study on efficiency and staff movement.

In the late 1980s Victoria experimented with moving its Department of Agriculture to Bendigo, following the example of the NSW Department’s head office shifting from Sydney to Orange. The initiative was stunted by the refusal of senior people to move to the country, and eventually abandoned when the Kennett government was elected.

The problem, according to Community and Public Sector Union state secretary Karen Batt, is that “people don’t move”. When 200 of 400 positions from the State Revenue Office were moved to Ballarat, only eight employees followed. “Effectively they had to run dual processes,” Batt told The Mandarin, splitting the organisation in half. Within six months, “the senior managers had moved back to Melbourne, and now it’s pretty much used as an administrative call centre.”

Only around 100 of the 700 staff at the Transport Accident Commission were prepared to go to Geelong. To make matters worse, the agency suffered a “slow bleed” of staff pre-emptively jumping ship over the two years leading up to the move. Only eight of 48 moved with the Rural Finance Corporation when it was moved to Bendigo.

“The TAC made a huge attempt to keep knowledge in the organisation until the transfer date,” said Batt, who claims the organisation paid around $90 million in redundancies and incentives to retain employees.

The need to effectively train an entirely new workforce means relocating highly specialised roles — as in Townsville’s proposal that it take the Department of Foreign Affairs and Trade’s south-east Asia and Pacific trade policy experts — could encounter great difficulty in practice.

One upside is that property rental is cheaper outside the city. But, as Labor ACT Senator Kate Lundy argues, geographic dislocation undoubtedly creates inefficiencies, undermining those savings. Indeed, the previous NSW government made the bureaucracy more centralised to increase efficiency.

Because staff don’t move, argues Batt, you end up “paying a fortune to effectively change your workforce over”. Replacements, including redundancies and re-training, usually end up costing around two and a half times annual staff costs, according to the union.

The loss of skills and corporate knowledge means it tends to take “two or three years” before productivity reaches pre-move levels. To avoid the costs of replacing huge numbers of staff, governments need to do more analysis of where their employees reside before moving.

In an announcement that a re-elected Coalition government would move WorkCover’s head office to Geelong, Premier Denis Napthine last year stated that:

“… it is anticipated a relocation of this size would generate more than $50 million per year in additional economic benefits for the Geelong region.

“The relocation of WorkCover’s head office to Geelong, in combination with the national headquarters of National Disability Insurance Scheme (NDIS) and the TAC, will create a cluster of insurance and disability related services.”

The Mandarin asked Eric Abetz to clarify decentralisation plans at the Commonwealth level but he is yet to respond.

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