A power of confidence
The general power of competence and new provisions on trading and charging were intended to throw the shackles off local government. Derek Bedlow and Philip Hoult report on the results of the Local Government Lawyer/Freeth Cartwright LLP survey and the subsequent roundtable
The general power of competence was considered by the Government to be the jewel in the crown of the Localism Act. Taking pride of place as clause 1 of the Act, it provided the power to local authorities to undertake any activity that an individual person could lawfully do, albeit with some specific limitations.
“The new power will give councils the legal reassurance and confidence to innovate, drive down costs to deliver more efficient services rather than needing to rely on specific powers,” the Department for Communities and Local Government stated at the time the Bill was unveiled in December 2010.
The previous attempt at providing local authorities with a non-specific power – the power of well-being introduced by the Local Government Act 2000 – had fallen rather flat, being used by no more than 17% of authorities before being holed beneath the waterline by the final LAML decision in 2011.
This time things would be different, the Communities Secretary Eric Pickles promised, not least because it would overcome the “innate conservatism” of local authority lawyers, which he claimed had been a key factor in the low utilisation of the well-being power. “The general power of competence turns the determination requirements on their head,” he told Parliament. “All those fun-loving guys who are involved in offering legal advice to local authorities, who are basically conservative, will now have to err on the side of permissiveness.”
The Communities Secretary also claimed that a general power of competence would be well accepted by local authorities “which understand exactly what it means”, whilst the wellbeing power “had to be invented as a concept”.
The position now
Winding on to late 2013, however, and the general power of competence has yet to make much headway in turning councils into the innovative, risk-taking organisations that the Government would like.
When asked what difference the general power of competence had made to their authorities’ appetite for risk, only a handful (6%) said the general power of competence had made ‘a significant positive difference’ while almost half said it had made no difference at all. The remaining 45% said the positive difference was only ‘slight’.
Respondents were also asked to provide examples of where the general power of competence had been used successfully – that is, where the project in question would not have happened prior to the Localism Act.
Not many were given, however. Those examples that were proffered included a resident priority fund, secondments of staff to non-public bodies, and bringing judicial review proceedings over a decision to close local hospital services. The general power of competence has also been used to enable the continuation of prayers at council meetings.
So what are the barriers to its wider use? One reason identified by the survey is the uncertainty about how wide the power really is. Fewer than a quarter of respondents (24%) were persuaded that it is ‘a genuine general power that, as the Government suggests, can be relied upon in most situations’, while the same proportion again said that it was ‘unclear where the limits of the power lie in the absence of significant direction from the courts’.
Meanwhile, more than half (52%) agreed with the statement that ‘it is infill that provides the power to support activities not otherwise supported by other powers. Where enabling powers already exist, it does not extend the ability of the authority to act beyond existing limits’.
More specifically, respondents were also asked what they saw as the main barriers to the use of the power. Respondents could give more than one answer to this question and the most frequently-cited reason – by 44% of respondents – was that existing powers were adequate for the needs of their authorities.
This was followed by the lack of precedent (cited by 39%), fear of challenge if the power is relied on (29%), the lack of understanding and awareness among members and officers (24%) and a lack of understanding and awareness among members of the legal team (4%).
Give us the tools…
Another barrier frequently highlighted was the lack of resources available to local authorities for new projects that might take advantage of the general power of competence.
“The budget situation is so difficult and capacity so stretched that available capacity is having to go on delivering cuts in order to balance our budget, so there is very little time for positive work,” reported one respondent.
However, some believed that the pre-2011 Act problems over culture and mindset remain. “I don’t think it is always about lack of understanding or awareness – I think it is sometimes about our mental barriers that ‘as a council we should do this’,” said one.
A further reason mooted at the roundtable was a growing risk aversion among members, fuelled by media scrutiny from the likes of the Taxpayers’ Alliance. In the past, it was pointed out, local authorities managed to build reservoirs, airports and even set up telecommunications companies with far fewer ‘powers’ than they possess now.
Managing expectations
Conversely, some survey respondents faced the opposite problem of meeting members’ and officers’ expectations of what they can do given the ‘hype’ over the general power.
In some instances, officers and members have assumed that the general power means that the legal department no longer needs to be consulted before they develop their plans. In the words of one member of the roundtable: “Client departments often run off with the general power before consulting the lawyers. We then have to backfill or adapt their plans, which fuels the perception that lawyers are obstructive.”
As we have already seen, one of the reasons that many lawyers see the need to advise caution on the use of the general power of competence is the uncertainty among many about the extent to which it can be relied upon.
According to the survey, what would help legal departments get on the front foot in this regard would be clear, “unequivocal” Government guidance with more examples – appropriate to different types of authority – of where it can be applied.
One senior lawyer reported on their attendance at a session on the general power held at Local Government House at which the Communities Secretary spoke. “The examples of projects given did not, in any way, require the general power of competence – they could all have been done without it. We need pathfinder authorities to take major strides in this area and take a leadership position,” the respondent argued.
Others commented on the need for central government to “really let go of the reins and allow us to raise revenue locally” and adopt “a more robust stance…to free local government to get on with things without caveats”.
For many local authorities, therefore the general power has yet to promote the spirit of enterprise and localism that the Government claimed it would unleash.
Trading places
The trading and charging powers brought in by the Localism Act also appear under-utilised so far. Asked whether their authorities had made, or were intending to make use, of these powers:
• 33% of respondents reported that there was “little appetite for further charging and trading at their authority”;
• 30% said the powers did not go far enough to support significant charging and trading;
• 26% said their authorities had significantly increased their commercial activities, but had not needed the new powers to do so;
• 12% had taken significant advantage of the new powers.
Respondents’ comments indicated a general nervousness about the ability of local authorities to make a profit from ‘commercial’ activities, while concerns over the state aid regime were mentioned a number of times as well. There were also fears about the public perception of loss-making schemes at a time of spending cuts, or being perceived as introducing ‘stealth taxes’ or posing a threat to local businesses. As with the general power, economic weakness and reduced resources have had a dampening effect too.
In part, the low take-up of these powers is down to timing, with a number of respondents saying that they had projects in the pipeline. But the survey and roundtable also found that there remained significant technical and cultural obstacles to councils utilising the charging and trading powers.
From a legal and practical point of view, there is a widespread view that the powers do not go far enough. This is, perhaps, not surprising given that the charging and trading powers were primarily included in the Localism Act to prevent councils from using the general power of competence too liberally in this regard.
“It is not a very innovative piece of legislation,” said one respondent. “It doesn’t deliver what it promises and many people have lost interest in it.”
Of particular concern is the requirement for local authorities to set up a limited company structure before they can trade, with all of the taxation and governance issues and costs that this creates.
Instead, delegates at the roundtable suggested, the Government could allow local authorities to commence trading operations within their existing organisations before transferring these to a company vehicle if they were successful and had reached a certain turnover threshold.
The roundtable also suggested that the Local Authorities (Goods and Services) Act 1970 was a more useful piece of legislation. If the Government was really keen to encourage local authorities to engage in commercial activities, it was argued, then re-invigorating this Act – by replacing the ‘Designated List’ with a general definition of a public authority for example – would be a more effective means of achieving this aim.
Derek Bedlow is Publisher and Philip Hoult is Editor of Local Government Lawyer
