Financial cost of reorganising in the public sector 'could be huge'

Jonathan Reed

GOVERNMENT plans to tear down regional government and cut public sector jobs could end up costing vast sums, Ministers have been warned.

Abolishing regional development agencies and strategic health authorities and cutting council workforces are set to cost considerable amounts in redundancy payouts and other costs.

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Some estimates have put the costs of abolishing Yorkshire Forward and the other regional development agencies (RDAs) at 1.5bn – slightly more than the entire budget for all of the agencies this year.

The RDAs will be replaced by Local Enterprise Partnerships – led jointly by councils and businesses – in 2012, with Ministers set to announce soon which partnership bids have been approved.

But Howard Kew, chief executive of Financial Leeds, said at a fringe meeting at the Tory conference in Birmingham yesterday: “The existing infrastructure model is being dismantled. There are 400 people down at the RDA who’ve been thinking for the last six or seven years they were doing a great job who have now been told ‘you’re not doing a great job and by the way you’re not going to have a job’.”

He said his lesson from restructuring in the private sector was that “change costs” – with a guide that saving 1m would cost 1m in the first year.

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“That’s what we worked on,” he said. “If you look at the redundancy payouts which are going to come out from strategic health authorities, local authorities and regional development agencies and all the rest of it, it’s not surprising it’s going to cost us to do it.

“It’s not obvious where that money is coming from.”

A report last month said Ministers had asked the RDA network to examine contracts in detail to see how much it would cost to break some of them, an extra cost on top of redundancies.

Mr Kew also said Local Enterprise Partnerships would fail unless they got some public funding.

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