Local authority - General Power of Competence: consultation

Background to Request for Consideration of a Local Authority General Power of Competence

Currently, local authorities may do only those things which statute empowers them to do. Anything else is ultra vires^[1].

A General Power of Competence is commonly defined as a statutory power to do “anything that individuals may generally do”, enabling local authorities to “do things that are unlike anything they, or any other public body, have done before”^[2] and is currently available to local authorities in England, Wales, and Northern Ireland.

A number of representations have been made to the Scottish Government seeking the introduction of a similar General Power of Competence for local authorities in Scotland.

However, despite the existence of a General Power of Competence in England, Wales and Northern Island, many local authorities continue to be reluctant to use that power to explore activity beyond those functions explicitly set out in statute due to concerns as to potential legal challenge and interpretations by the courts of the limitations of the scope of this power.

The general power of competence introduced by the Localism Act 2011 enables councils in England to do things:

a) an individual may generally do

b) anywhere in the UK or elsewhere

c) for a commercial purpose or otherwise, for a charge or without a charge

d) without the need to demonstrate that it will benefit the authority, its area or persons resident or present in its area (although in practice councils will want to realise such benefits).

However, limits apply where a local authority provides a service otherwise than for a commercial purpose. The general power confers power to charge a person for providing a service to the person only if:

a) the service is not one that a statutory provision requires the authority to provide to the person,

b) the person has agreed to its being provided, and

c) the authority does not have an existing power to charge for providing the service.

A local authority cannot trade in services that it has a statutory duty to provide. A local authority also cannot use the general power to introduce new local taxes or to undertake borrowing outwith the existing rules. As such, a local authority cannot use the general power primarily to raise money but it can receive income as a consequence of using the power for a different primary purpose.

Whilst there appear to be no limits on charging for commercial enterprises, a local authority cannot use the general power to profit from charging for services – this power is instead conferred by the Local Government Act 2003. The general power is subject to a duty to secure that, taking one financial year with another, the income from charges as permitted by the general power does not exceed the costs of provision. This provision applies separately to each type of service.

As well as including restrictions on profiting from charging for services, the General Power of Competence can also not be used to levy taxes or to borrow beyond existing statutory powers and the requirements of the prudential framework.

The Local Government Act 2003 enables councils to trade in activities related to their functions on a commercial basis with a view to profit through a company. In addition, the 2003 Act empowers councils to charge for any discretionary services on a cost recovery basis.

This consultation therefore seeks to establish what functions, beyond those already conferred by statute, local authorities in Scotland may wish to pursue and whether new legislation or amendments to existing legislation would be required to deliver those additional functions.

This consultation also seeks to explore how best to deliver a level of confidence and assurance to local authorities to ensure that any further powers are utilised effectively.

Responses are sought, in relation to both existing legislative powers in Scotland and the wider legislative powers in England, Wales and Northern Ireland, on the barriers to using such power, the concerns and perceived risks, and potential conflict with other legislative provisions.

Views are also sought on how best to ensure that legislation contains the right balance of flexibility and control to mitigate risks arising from any greater statutory freedoms.