Local authority general power of competence: consultation analysis

Consultation theme 1: current legislative restrictions/limitations

Four questions were asked in this section to understand the perceived barriers and risks to using existing statutory powers and the limitations of those powers. Annex B summarises the questions asked within this theme.

In both consultation responses and webinar discussions the following limitations/barriers of existing local authority legislative powers were frequently raised:

• The ultra vires principle: Currently a local authority must have a specific statutory power to act. In the absence of an enabling power, any action would be considered to exceed the legal scope of the local authority. However, the effect of the ultra vires rule is softened by the implied powers rule contained in section 69 of the Local Government (Scotland) Act 1973 (the 1973 Act), which states that “a local authority shall have power to do anything (whether or not involving the expenditure, borrowing or lending of money or the acquisition or disposal of any property or rights) which is calculated to facilitate, or is conducive or incidental to, the discharge of any of their functions.”
• Legislative restrictions on trading/revenue generation: The Local Authorities (Goods and Services) Act 1970 (“the 1970 Act”) allows a local authority to enter into an agreement for the supply of goods and services. However, in doing so a local authority is required “to consider whether such activity will contribute to the local area”. There is also a requirement to gain Ministerial consent for agreements in excess of a statutory limit. This implicitly requires Ministerial consent in the absence of a statutory limit. In addition, the ‘power to advance wellbeing’ in the Local Government in Scotland Act 2003 (“the 2003 Act”) defers to the 1970 Act in terms of trade activity and so although the 2003 Act specifically enables a local authority to impose reasonable charges for non-statutory services this is subject to the restrictions of the 1970 Act.
• Ambiguity of existing powers and lack of guidance: A number of respondents noted that the vague phrasing of legislation such as the ‘power to advance wellbeing’ and lack of guidance to clarify the meaning and scope of ‘this power allows for narrow interpretation by the courts. Some respondents noted that greater assurance would be provided by specific rather than general powers and with accompanying comprehensive guidance, setting out the scope of the powers, Scottish Government expectations of intended use and limitations, examples of best practice and guidelines for accompanying governance, assurance and accountability requirements.
• Requirement to demonstrate that activity is intended to promote wellbeing for be for the benefit the local area or residents: The ‘power to advance wellbeing’ requires a local authority to demonstrate that activity is intended to promote wellbeing and be for the benefit the local area and/or its residents. The phrasing of the legislation creates a concern that initiatives intended to benefit the local or wider area which are nevertheless difficult to demonstrate (other than generally lowering costs to tax payers) as providing a distinct direct ‘benefit’ may be subject to legal challenge and adverse interpretation by the courts.
• The 2009 case of Brent LBC v Risk Management Partners Ltd and 2013 case of Portobello Park Action Group Association v City of Edinburgh Council were frequently cited in consultation responses (and were set out in detail in the consultation paper). The Court of Appeal held that Brent LBC had acted ultra vires in joining with other local authorities to set up a mutual insurance company. The Court of Appeal stated that the well-being powers do not support complex and speculative arrangements that are designed to save money and have no clear link to promoting or improving well-being, however the court’s decision was primarily under section 111 of the Local Government Act 1972 (the implied powers provision for England) rather than the equivalent wellbeing power in England.
• The Portobello case concerned an attempt to appropriate inalienable common good land for building a school, thereby taking away the right of the public to use the land. This was held to be unlawful on the basis that it circumvented planning laws and took away rights long enjoyed by the local public with the court commenting, that it was “far from self-evident the construction of a significant high school in a public park could be deemed a matter of ‘well-being’”.
• In both cases the attempted circumvention of other legislative provisions rather than limitations of the Power to Advance Wellbeing were the primary driver for judicial review rather than use of the ‘wellbeing’ power per se.
• Inability to undertake shared services/confinement of activity to the local area: Some consultation responses stated that a local authority cannot operate beyond the local area, resulting in restrictions on activity such as shared services that cross local authority boundaries and issues of interpretation regarding what constitutes ‘benefit’ to the local area and/or its residents.
• Inability to operate commercially: The inability to operate commercially to generate revenue was often cited in consultation responses. As noted in point 1.2 above, although the 2003 Act specifically enables a local authority to impose reasonable charges for non-statutory services and to enter into arrangements or agreements with any person, section 22 of the Act also contains restrictions (as set out in 1.7 and 1.8 below) which prevent a local authority from profiting from charging for non-statutory services. Such activity would instead fall under the 1970 Act and would require Ministerial consent.

Note: The Localism Act, which confers a General Power of Competence on local authorities in England and Wales, contains similar restrictions in relation to charging for discretionary services and also restricts commercial activity to that which relates to an existing statutory function. Annex A provides a summary of these restrictions.

• Duplication of functions: Several responses noted the restriction within the 2003 Act which states that the power cannot be exercised in a way which unreasonably duplicates the functions of another statutory body^[2], unless that body consents to that exercise of the power. This may prevent a local authority from responding to market failure or providing services where either a gap is identified or demand exceeds the services currently available, in areas such as health care, educational or environmental services which overlap with services provided by another statutory body.
• Inability to raise money by levying or imposing any form of tax or charge: A few respondents noted the desire for local authorities to introduce new local taxes or levies (see Annex A).
• Limitations of state subsidy rules: The restrictions of the state subsidy rules were often noted as a barrier to local authority aspirations (see Annex A).