Competence Power – Hello!

May 18, 2011

Nicholas_Dobson_v3_blog In the electronic age it is nice to think of Eric Pickles, Secretary of State for Communities and Local Government (CLG), sitting himself down, Jane Austen-like, to pen a few delicate thoughts to Clive Betts MP, Chair of the CLG Select Committee. For that is no doubt what he (or his civil servants) did on 21 March 2011 in responding to CLG Committee questions about the principles and intended operation of the proposed Competence power. But although offering no startling revelations, the letter (and its annex) does colour in some of the thinking and policy context surrounding the proposed measure.

First off the stocks was why the Government had chosen not to follow the approach of section 39 of the Companies Act 2006 in tackling ‘ultra vires’ (the validity of a company act shall not be called into question ‘on the ground of lack of capacity by reason of anything in the company's constitution’)? The Government’s response was that since local authorities do not have constitutions in the same way as companies (local authorities being creatures of statute) ‘a direct analogy is not possible’ Also, section 39 is aimed essentially at protecting third party dealings with companies. The Government therefore felt that ‘such an approach would not go far enough to ensure that officers and members of local authorities can be confident that actions proposed are actually lawful, as opposed to simply being binding.’

But will the competence powers not allow authorities to go to the bad, taking themselves off, say, to the casino, for a night’s reckless gambling on the Council Tax? No, reassured Mr. Pickles. Existing statutory restrictions and limitations will apply. Also ‘the general legal framework in which local authorities operate, coupled with the range of safeguards in place concerning the financial control systems of local authorities, should provide adequate assurance that councils will act both lawfully and with due regard to the proper use of public money.’ The Secretary of State has also reserved powers in clause 5(3) to deal with any unanticipated ‘off piste’ behaviour.

Why though does local authority trading have to be through a company? Does this not ‘undermine creativity and innovation’? The Government responded that ‘local authorities should not be able to use their public status to gain commercial advantage over the private sector’ but that this should not prevent them from acting creatively and innovatively.

A key reason for the generally anaemic take-up of the well-being powers is widely thought to be a crisis of confidence following the June 2009 Court of Appeal LAML judgment. The aim of the competence power is therefore to ‘remove much of the doubt about the scope of local authority powers’ and to ‘increase the confidence of local authority officers and members in the scope of those powers’.

In the circumstances the Government rejected the notion of ‘some kind of guidance or prior-authorisation mechanism’ to give authorities the necessary reassurance. As a canon of localism, the Government is ‘keen to reduce the culture of local government dependency on central government’ and ‘a pre-authorisation mechanism would totally undermine this approach’.

Whilst the competence power is widely drawn it does contain limitations. In particular, clause 5 empowers the Secretary of State to ‘make supplemental provision’ in various circumstances including as mentioned power in clause 5(3) to prevent authorities doing anything specified in a statutory order. Will this be used to claw back what the competence power confers? The Secretary of State says not since the Government feels ‘very strongly that the general power of competence should not be subject to unnecessary conditions or restrictions’. Equally though, ‘the ability to set conditions around the use of the power and restrict its use is a necessary safeguard to protect ratepayers and the Exchequer.’

Whilst on clause 5, Mr. Pickles introduced on 10 May 2011 a new clause 12 into the Localism Bill which (amongst other things) sets conditions on use of the proposed power in clause 5(1) to repeal, revoke or disapply any provision preventing or restricting authorities from exercising the general power. These are that the provision:

Is proportionate to the policy objective intended to be secured by it;
Taken as a whole, strikes a fair balance between the public interest and the interests of any person adversely affected by it;
Does not remove any necessary protection;
Does not prevent any person from continuing to exercise any right or freedom which that person might reasonably expect to continue to exercise;
Is not of constitutional significance.
Does not abolish or vary of any tax.

Whilst the competence power may help local authorities it does not cover other public bodies. Should these, asked the CLG Committee, be given a similar power? To the Government the issue seems to be a combination of ‘horses for courses’ and cultural constraints. For since ‘There is ‘no ‘one size fits all’ general power’, the powers appropriate for a body ‘depend on its purposes and functions’. In each case the fundamental question is ‘whether the body in question has all the powers necessary to meet its purpose, or 'objects' including effective joint working’.

And ‘the feedback we have received so far is not that organisations lack the competence to engage with local government but that they may be unwilling or do not feel empowered to do so.’ With its barrier-busting policy (e.g. http://barrierbusting.communities.gov.uk/) and Community Budgets pilot, the Government indicates that it is ‘committed to supporting places to tackle barriers in local innovation’.

Finally, questioned the CLG Committee, has the Government missed the opportunity of meeting ‘the broader challenge of reforming the constitutional role and status of local authorities in addition to their available powers?’ In the Government’s view, whilst the Localism Bill ‘is intended to bring about a shift of power from Westminster to local people via their local authority’, ‘a new constitutional framework for local government would be a complex matter requiring careful consideration alongside wider questions such as those around a written constitution’. And since the ‘Political and Constitutional Reform Select Committee is currently considering the potential codification of the relationship between Central and Local Government. . . it would be wrong to pre-empt this inquiry’.

Whilst clearly there were no headline-grabbing revelations in Mr. Pickles’ letter, it is interesting as a sort of ‘Hello Magazine’ interview with the proposed new power. The Government also apparently means what it says about wishing to give authorities the ability to act innovatively and creatively in the public interest. But what the measure won’t of course do is to remove ultra vires or the subliminal constraints of administrative law which have been developed over many years to regulate the exercise of public authority power.

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.