Local authority general power of competence: consultation analysis

Annex A: Limitations of a General Power of Competence

Limits on charging in exercise of general power^[3]

Whilst providing a level of freedom, the General Power of Competence contained in the Localism Act 2011 for England and Wales does contain express limitations. Local authorities may not use the power:

• to do anything that is specifically prohibited in other legislation;
• to raise taxes;
• to alter the political management of the local authority;
• to undertake commercial activities otherwise than via certain types of company;
• to trade in services that they have a statutory requirement to provide;
• to charge for services otherwise than for a discretionary service (i.e. a service which is not one that a statutory provision requires the authority to provide to the person and where the person can decline the service) and on a cost recovery basis; and
• to create byelaws or undertake enforcement activity.

Limits on doing things for commercial purpose in exercise of general power^[4]

Chapter 1, section 4 of the Localism Act 2011 contains express limitations in relation to commercial activity, requiring such activity to relate to an existing statutory function and to be conducted through a company. This is in large part to ensure that local authorities do not receive an unfair tax advantage over private sector entities, due to their ability to reclaim tax, when operating for a commercial purpose. There is no limit on the charge that can levied when providing discretionary services on a commercial basis through a company, however, a local authority may not do things for a commercial purpose in relation to a person if a statutory provision requires the authority to do those things in relation to the person.