Power dressing PDF Print E-mail
Thursday, 15 December 2011 09:30

General_Power_iStock_000016613284Small_120x90Will the general power of competence take the shackles off local government as ministers have argued? Judith Barnes looks beyond the hype and analyses its likely impact on local authorities.

The Conservatives committed to a general power of competence in their manifesto in February 2009 and have carried through their promise in the first major piece of legislation affecting local authorities.

Local authorities lost their confidence to innovate following the judgment in the London Authorities Mutual case. The judgment on vires in both the High Court and the Court of Appeal went back to the ‘bad old law’ of strict statutory interpretation and the inability to do anything that was ‘incidental to the incidental’. There is no doubt that this had an effect on the confidence of local authorities to pursue innovative schemes and projects, but despite that some have persevered.

Eric Pickles seems to blame this on the lawyers (somewhat unfairly in my view). In the second reading of the Bill when Hazel Blears questioned the Secretary of State about the difference between the wellbeing power and the general power of competence, he replied:

“The truth is that there is not much difference and we welcomed the intention to introduce the [wellbeing power], but only about 17% of authorities have done so. The reason for that is the innate conservatism of those providing legal advice, so councils have tended to err on the side of not introducing it.

“The reason why the general power of competence is so important is that it turns the determination requirements on their head. 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… I believe that a general power of competence is better than a general power of wellbeing, because the latter had to be invented as a concept whereas the former is well accepted by local authorities throughout the world, which understand exactly what it needs.”

True to their word, the Conservatives sought to amend the wellbeing power to achieve their aims during the passage of the Local Democracy Economic Development & Construction Act 2009. However, Rosie Winterton suggested that the amendment would not have covered the creation of a mutual insurance company and that the Government would look again at powers for local authorities in due course. The explicit power to set up a mutual insurance company was, however, included and the provisions are set out in section 34 and section 35 of the 2009 Act.

Jack Straw had suggested that adopting the Conservatives’ proposals might not prevent Islington Council from making an atom bomb (Hansard column 202 – 13 October 2009). Many may struggle to understand why this would not be deemed to be irrational and/or unreasonable in the context of the exercise of powers by Islington Council.

What was delivered?

According to Eric Pickles, “probably the single most important item in the Bill”, has pride of place in section 1. The wording is far wider than many imagined and it is difficult to conceive of anything that does not fall within the general power of competence (although for many of us it was difficult to find anything that was outside of the wellbeing power!).

The Act enables a local authority to do anything “that individuals generally may do”, including things unlike what public bodies do. This is a comparison with the fact that an individual can effectively do what they like, whereas a statutory corporation may only act where there is a duty or power, or action may be implied from or incidental to an Act of Parliament. Here, the Government has turned that around so that local authorities will be unique among public bodies, having wider powers than, for example, central government departments or quangos/NDPBs that are constrained by their enabling legislation/Royal charters.

The section goes on to say that the power may be exercised:

  • anywhere;
  • for a commercial purpose or otherwise;
  • for a charge or without charge;
  • for the benefit of the authority, its area or persons resident or present – or otherwise.

This means that it can be exercised abroad with no nexus back to the authority’s administrative area. Local authorities could therefore potentially manufacture widgets in Japan and sell expensive cars like Jaguars, should they so wish.

Section 1(5) says that the general power “is not limited by the existence of any other power which (to any extent) overlaps the general power”. Any other such power is not limited by the existence of the general power. What it seems to be getting at is that the general power could be used to ‘top up’ other powers where they may not stretch far enough.

Section 2 sets out boundaries to the scope of the power including:

  • restrictions as to the exercise of a pre-commencement power will also apply to the general power;
  • limitations in powers in earlier legislation will apply;
  • post-commencement limitations will only apply where they are expressed to apply to the general power/all powers;
  • not broadening the general principles of delegation in Part 6 Local Government Act 1972/Part 1A, Local Government Act 2000 nor the Deregulation and Contracting Out Act;
  • commercial trading will only be permitted in function related activities where the Authority is not under a statutory duty to provide services, as with the section 95 Trading Power, but must only be exercised through a section 1(1) Companies Act company or a society registered or deemed to be registered under the Co-operative and Community Benefits Societies and Credit Unions Act 1965 or the Industrial & Provident Societies Act (Northern Ireland) 1969; and
  • not allowing authorities to do anything specified in an Order made by the Secretary of State (SoS) under section 5(3) – surprise, surprise.

Section 3 introduces a power to charge, where a local authority is not under a duty to provide the service; the person has agreed to the service being provided and the circumstances do not fall within any explicit charging power nor within section 93 Local Government Act 2003. As with the trading power above, this is a charging power for activities a local authority wishes to pursue under the new general power. Like section 93 Local Government Act 2003 there is a duty to secure that “taking one financial year with another, the income from charges… does not exceed the cost of provision”, ie, limited to cost recovery. Section 3(4) states that the duty applies separately in relation to each kind of service, presumably to avoid cross subsidy.

On the positive side, the SoS may “by order amend, repeal, revoke or dis-apply” a statutory provision, whenever passed or made, that prevents or restricts local authorities from exercising the general power. The SoS may also remove or reduce any overlap of statutory provisions with the general power, but a reserve power in section 5(3) enables the SoS to make an order to prevent local authorities from doing anything specified or which is of a description set aside in the order. Conditions may also be placed on the exercise of the power (section 5(4)) and orders may be made in favour of all local authorities, particular local authorities or particular descriptions of local authorities. There is an obligation on the SoS to consult local authorities, representatives of local government and such other persons as the SoS considers appropriate before making an order.

There is no explicit provision, like there is in the wellbeing power, that states that section 1 may not be used to raise money, whether by precept borrowing or otherwise, which is often the usual formulation of words.

In the Conservative document Control Shift published in February 2009 it was made clear that “no action – except raising taxes, which requires specific parliamentary approval – will any longer be ‘beyond the powers’ of Local Government in England unless the local authority is prevented from taking that action by the common law, specific legislation or statutory guidance”. As there is no explicit prohibition on the face of the Act one assumes that this is either because the Government views the new power as a power of an individual and individuals do not have the power to raise taxes; or that there is likely to be an order pursuant to section 5(3) that will prevent the raising of taxes, since Eric Pickles has on more than one occasion stated that the power will not allow local authorities to “impose taxes like modern day Sheriffs of Nottingham”.

Eligibility

The general power of competence will only apply to English councils, as follows:

  • counties;
  • districts;
  • LBCs and Common Council of City of London;
  • Council of Isles of Scilly;
  • parish councils as specified by SoS by order.

Where parish councils become eligible to exercise the general power of competence then they are removed from the ambit of section 137 Local Government Act 1972.

In Wales the wellbeing power is retained. The schedule also makes it clear that local authorities in Wales will no longer have to have regard to a sustainable community strategy to exercise the power. The SoS must consult the Welsh ministers before making an order under section 5(1) that has effect in relation to Wales, ie, removal of an application etc, of a statutory provision.

Sections 9 and 10 introduce new powers for fire & rescue authorities (FRA) to do things related to their purposes. This new power applies to metropolitan fire & rescue authorities, LFEPA and combined fire & rescue in England and Wales, but not county councils that benefit from the general power of competence.

There are new provisions in sections 11-14 giving wider powers to integrated transport authorities, passenger transport authorities, economic prosperity boards and combined authorities, like fire & rescue authorities that are not being given the general power of competence, including powers to:

  • charge;
  • do things that are indirectly incidental to functional purposes, through “any number of removes”; and
  • do for a commercial purpose anything that it may otherwise do.

For what those provisions achieve, they are quite clumsy and convoluted and replace section 111 – for this piece they are too detailed to cover.

Conclusion

All in all, the new general power of competence is to be welcomed. One wonders how far local authorities will use it, or whether it was ever powers that was really the problem, rather than the availability of resources or capacity at management level to develop and implement new schemes and projects.

The Government could, had it so chosen, have abolished the ultra vires rule altogether, but that seems to be a step too far even for the Conservatives. It therefore appears that one of the checks and balances that remains will be the ability to judicially review decisions over exercise if not capacity.

Finally, local authorities are given the blessing of ministers to be able to carry out the functions of other public authorities, but the wider public sector may not be able to delegate their functions to local authorities to deliver because of their own concerns about vires.

We look forward to local authorities getting back their ‘mojo’ and particularly using the new general power of competence to stimulate the local economy to help trade out of the current recession.

Judith Barnes is a partner and Head of Local Government at Eversheds LLP. She can be contacted on 0845 498 4059 or by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

 
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