Local authority general power of competence: consultation analysis

Risks of amendments to the statutory framework

A number of respondents were concerned that any relaxation of statutory restrictions would undermine the importance of legislative controls designed to protect public funds and the delivery of statutory services. Referenced was made to the financial collapse of local authorities in England and the potential for similar circumstances to occur in Scotland should greater statutory freedoms be introduced.

One respondent specifically highlighted the link between the consequence of ‘Localism plus Austerity’, which characterised UK Government policy towards English local authorities in the 2010s and the positive encouragement for local authorities to find new sources of revenue as an important factor in the financial disasters that have befallen a number of English local authorities since.

A crucial point raised related to the specific limitations of the resources of the Scottish Government and those of other devolved nations, noting that although there are market constraints on UK Government taxation and borrowing there are no legal constraints. Conversely, the Scottish Government operates on the basis of what is essentially a fixed budget as the capacity to generate more income from devolved taxes is limited and borrowing is tightly constrained by the Fiscal Framework. It was noted that whereas the UK Government could potentially bail out a large English local authority, the Scottish Government does not have the fiscal levers of the UK Government and could only do so at potentially significant detriment to other spending programmes.

Concerns were raised in relation to the potential for authorities to engage in ‘entrepreneurial activities’ to generate income without the appropriate commercial expertise to manage major businesses. Other concerns were raised about authorities having insufficient funds to pay the salaries required to recruit managers of the same calibre as employed in the private sector and the inability of local authorities to mitigate risk through diversification to the same extent as private sector corporates.