Localism Act – The Work Begins

So following the arrival of the Localism Act 2011 on 15 November, the evolutionary process is now complete – at least for the time being. For after many mysterious Parliamentary transformations, the final shape of the beast has now become clear. And a mammoth creature it is with its 241 sections and 25 schedules. Civil servants are now busy working on secondary legislation with a view to key provisions becoming effective on or by 1 April 2012.

It was gratifying to hear Local Government Minister, Bob Neill, indicate at the end of the ACSeS Annual Development Forum in Southampton on 17 November, that he envisaged regular future dialogue between the Department for Communities and Local Government (CLG) and the Association. With ACSeS already having excellent lines of communication with CLG lawyers, it is good for local government that its voice is now being heard in the corridors of Government power.

As the Act cuts its teeth, this blog will note a few of its salient provisions. For it aims (as Decentralisation and Cities Minister, Greg Clark put it in MJ on 17 November) to be a ‘licence to innovate’ and to put ‘power back where it belongs, with communities and locally-elected councillors who represent them’.

Competence Power

This well-trailed provision in Part 1 should significantly increase the confidence of authorities to take (within reasonable, lawful and prudent bounds) creative and innovative action in the interests of those they serve. The measure is deliberately widely drawn to make entirely clear the intention of Parliament that (as Greg Clark put it in the MJ) a local authority is empowered (see section 8) ‘to do anything an individual can, unless Parliament explicitly forbids it’. There are analogous provisions covering fire and rescue authorities (sections 9 and 10) and also other relevant bodies (i.e. integrated transport authorities, passenger transport executives, economic prosperity boards and combined authorities – see sections 11 to 14).

Transfer and Delegation of Functions

Described by Lord Beecham as ‘the most localist part of the entire bill’, the ‘power to transfer local public functions to permitted authorities’ (sections 15 to 20), given a legislative future by an amendment on 12 September 2011, is striking. As Baroness Hanham acknowledged, this was ‘inspired by the Core Cities Group’. Led by the leaders of Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield councils, this group describes itself as aiming in partnership ‘to enable each City to enhance their economic performance and make them better places to live, work, visit and do business’. The new powers (originally moved by Lord McKenzie) were as indicated adopted by the Government.

As Lord McKenzie pointed out in the debate, whilst the powers were sought for Core City members, they will in fact be available to any economic area which fulfils the eligibility criteria. For the overarching aim of the provisions ‘is to drive economic growth and productivity, and reduce dependency’.

Pre-Royal Assent versions of the Localism Bill had similar (but narrower) provisions buried in Schedule 2 in what had been proposed new sections 9HA and 9HB in a new Part 1A of the Local Government Act 2000 (respectively, power to transfer functions relating to public services to elected mayors and Secretary of State to consider certain proposals as to the exercise of powers under section 9HA). In the debate, Lord Beecham welcomed the extension beyond elected mayors since he felt that the opportunity should be available to ‘councils with the more conventional model of leader and executive’.

So what do this new measure do? Section 15(1)(a) enables the Secretary of State to transfer by order (and with its consent) a local public function from the public authority in question to a ‘permitted authority’. A ‘public authority’ includes a Minister of the Crown or a Government department and ‘permitted authorities’ are county and district councils, economic prosperity boards and combined authorities. A ‘public function’ is one otherwise than a power to make regulations or other legislative instruments and a ‘local public function’ is one relating to the permitted authority’s area or persons living, working or carrying on activities in that area (section 20).

Under section 15(1)(b) the Secretary of State may make provision by order about the discharge of local public functions transferred to permitted authorities, including enabling functional delegation. However, consistent with the reason for introducing these provisions, the Secretary of State may not make an order unless s/he considers it likely that doing so would promote economic development or wealth creation or increase local accountability in relation to each local public function transferred.

Government ministers may (per section 16(1)) ‘to such extent and subject to such conditions’ as they think fit, delegate to a permitted authority any of their functions which they consider may be appropriately exercised by the permitted authority. However, these functions do not include the power to make regulations or other legislative instruments (section 16(2)).

Permitted authorities can make a ‘relevant proposal’ to the Secretary of State (i.e. proposing exercise of powers under these provisions, accompanied by specified supporting information and evidence). The Secretary of State must then consider the proposal and notify the permitted authority of what action (if any) s/he intends to take (section 18).  Given the extensive nature of the powers, Baroness Hanham confirmed in debate that ‘final decisions over whether to approve proposals to transfer a function to one of the core cities. . . [or presumably elsewhere]. . .will rest with Parliament’.

As she indicated at the time: ‘Any order covering the transfer of functions to a permitted authority would be subject to a super-affirmative procedure. That would require that the order be laid in draft for 60 days, during which formal representations would be made. After this the order would have to be approved by a resolution of each House before it could come into being’.

Baroness Hanham also then indicated that: ‘Decisions relating to the transfer of functions would be a collective agreement by all of government; not only individual departments but government as a whole would be willing to take that on’. The order procedure is now in section 19.

Whilst these provisions (driven as indicated by the Core City Group) were intended to empower major cities and other local authorities to develop their areas, improve local services and increase their competitiveness, they would equally seem to facilitate ‘community budgeting. For as is now well known, this is the Government term for the initiative previously (i.e. before May 2010) known as ‘Total Place’, whereby greater public service cohesion is to be encouraged by rationalising and streamlining public sector funding in a particular area. As the October 2011 Community Budgets Prospectus issued by CLG indicated:

‘Over the years a plethora of new initiatives and funding streams with strict rules passed down from Whitehall have created uncoordinated, inefficient and unnecessarily expensive public service silos with local professionals constrained in how they do their jobs and powerless to build connections between the services that individuals need. From the citizen’s viewpoint, services are too often not joined up, impersonal, complex, confusing and involve multiple contacts with many different providers’.

So:

'A Community Budget enables local public service providers to come together and agree how services can be better delivered, how the money to fund them should be managed and how they will organise themselves. As such, they support local councils, communities and individuals to rise to the challenge of tackling previously intractable, complex, interconnected problems and are well suited to issues requiring multi-agency solutions rather than those that can be solved by a single agency or service.'

Sections 15 – 20 in the 2011 Act should facilitate this as well as being a useful tool for those authorities able to agree workable cohesive arrangements with applicable local public service partners and also convince the Secretary of State (and Parliament) that making an order would promote economic development or wealth creation or increase relevant local accountability. However, (at least in respect of community budgeting) whilst there is now a legislative tool available, obstruction may be encountered with those unwilling to surrender personal territory or power. It will also of course be essential to ensure proper corporate governance arrangements  (amongst other things) in terms of effective stewardship of public monies and public accountability.

Standards

Monitoring Officers and other local government lawyers are going to have to do their best to make these provisions work given that they were rather a creature of compromise patched together at some speed and which now show distinct signs of being scantily wired-up in places.

Amongst these, managing the ‘independent person(s)’ in a way which preserves the fairness and effectiveness of investigation and determination processes is likely to need particularly careful handling. Avoiding conflicts of interest will be important here since the views of the independent person must be sought by the authority ‘before it makes its decision on an allegation that it has decided to investigate’. Such views may additionally be sought by the authority under other circumstances as well as by a member who is subject to the complaint in question. Appointing more than one independent person will therefore be necessary (with obvious functional and practical complexities) and careful and skilled management will be needed to maintain the integrity of the whole process.

Pay accountability

These provisions (in sections 38 - 43 of the 2011 Act) require relevant authorities (section 43) to prepare ‘a pay policy statement for the financial year 2012-2013 and each subsequent financial year. As Robin Allen QC (with whom I spoke at the November 2011 ACSeS Conference) indicated in his supporting paper:  ‘The production of the pay policy statement will require a great deal of thought from a number of different angles. Firstly it will need to be very carefully written to accord with the facts. This may require very extensive consideration as to why a chief officer’s pay is what it is. It will require consideration of the outside market forces, the aims of any incentive plan, the relativities within the organisation, and value for money’.

On 18 November 2011 the Government issued draft Guidance in this area: Openness and accountability in local pay with the aim of bringing together ‘strands of increasing accountability, transparency and fairness in the setting of local pay’. Authorities will need to exercise particular care in formulating these pay policy statements to avoid being visited by subsequent unintended and unhappy consequences. This is particularly bearing in mind that (as the draft Guidance indicates):
‘. . .the Act requires authorities to set their policies on remuneration for their highest paid staff alongside their policies toward their lowest paid employees. In addition, it requires authorities to explain what they think the relationship should be between the remuneration of its chief officers and its employees who are not chief officers’.

CLG Five Key Measures

With the Localism Act still in the delivery suite, CLG issued a note of what it considered to be the five key measures of the Act, which it described as taking ‘power from central government’ and handing ‘it back to authorities and communities – giving them the freedom and flexibility to achieve their own ambitions’. Those measures are (per CLG headlines):

•    Community rights – ensuring ‘that community organisations have a fair chance to bid to take over land and buildings that are important to them’ (see Chapters 2 and 3 of Part 5);

•    Neighbourhood planning – ‘New rights will allow local communities to shape new development by coming together to prepare neighbourhood plans’ (see Chapter 3 of Part 6);

•    Housing – ‘The Localism Act will mean that more decisions about housing are taken locally, and the system is fairer and more effective’ (see Part 7);

•    Empowering cities and other local areas  - As noted above, enabling ‘. . . Ministers to transfer public functions to local authorities in order to improve local accountability or promote economic growth;

•    General power of competence  - Also noted above, to ‘give councils the green light to work in innovative ways’ (see Part 1).

Conclusion

Whilst the Act is what it is now and some parts of it will undoubtedly give rise to some ‘in flight turbulence’ as authorities and their lawyers get to grips with making its provisions work smoothly and effectively, at least CLG and ministers are now talking to ACSeS on these and other issues and regular meetings are consequently in prospect. This is entirely positive and can only help improve the quality of legislative measures going forward. It is also a pleasing indication of the increasing reach and influence of ACSeS.

Dr. Nicholas Dobson is a Senior Consultant with Pannone LLP specialising in local and public law is also Communications Officer for the Association of Council Secretaries and Solicitors. He can be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it..

© Nicholas Dobson,  November 2011