Local authority - General Power of Competence: consultation

Annex B: Legislative Powers in England, Wales and Northern Ireland

England

The Local Authorities (Goods and Services) Act 1970^[21]

1. Under the Local Authorities (Goods and Services) Act 1970 councils were given powers to enter into agreements with each other and with other designated public bodies.

The Local Government Act 2000^[22]

2. Part I of the 2000 Act gives local authorities powers to take any steps which they consider are likely to promote the well-being of their area or their inhabitants. It also places authorities under a duty to develop community strategies, together with other local bodies, for this purpose. These provisions are intended to give local authorities increased opportunities to improve the quality of life of their local communities.

3. Part I also enables the Secretary of State to remove statutory constraints on authorities’ ability to exercise the new well-being power and on their ability to plan co-ordinated local action.

The Local Government Act 2003^[23]

4. 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.

5. Originally, trading through a company was confined to certain categories of councils but a Trading Order, in force since October 2009, removed such restrictions.

Localism Act 2011^[24]

6. The Localism Act 2011 provides local authorities in England with a general power of competence, described as “power to do anything that individuals generally may do…even though they are in nature, extent or otherwise unlike anything the authority or other public bodies may otherwise do… in any way whatever, including:

a) power to do it anywhere in the United Kingdom or elsewhere,

b) power to do it for a commercial purpose or otherwise for a charge, or without charge, and

c) power to do it for, or otherwise than for, the benefit of the authority, its area or persons resident or present in its area.

7. A provision is included that resolves any potential conflict with other statutes by stating that the general power is not limited by the existence of any other power of the authority which (to any extent) overlaps the general power.

8. The General Power of Competence sits alongside local government’s existing powers to trade and charge. New powers contained in the Localism Act also provide the ability to charge for discretionary services on a cost recovery basis.

Boundaries of the general power

9. The general power enables councils 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).

10. The general power is limited by any restrictions imposed by a pre-commencement power in so far as it is overlapped by the pre-commencement power.

11. The general power does not enable a local authority to do anything which the authority is unable to do by virtue of a pre-commencement or post-commencement limitation (a prohibition, restriction or other limitation expressly imposed by a statutory provision).

12. The general power does not confer power for a local authority to:

• make or alter arrangements for the discharge of its functions by committees, joint committees, officers etc);
• make or alter arrangements for local authority governance;
• make or alter any contracting-out arrangements.

Limits on charging in exercise of general power

13. Limits apply where a local authority provides a service otherwise than for a commercial purpose.

14. 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.

15. A local authority cannot trade in services it has a statutory duty to provide.

16. A local authority cannot use the general power to introduce new local taxes or to undertake borrowing out with the existing rules. As such, a local authority cannot use the general power primarily to raise money but they can receive income as a consequence of using the power for a different primary purpose. For example, a council could give financial assistance to a struggling local enterprise by purchasing share capital just as any individual could. Similarly the council could lend money to support a local activity and earn interest on the loan and it can raise sponsorship for a community project.

17. A local authority cannot use the general power to profit from charging for services. 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.

Limits on doing things for commercial purpose in exercise of general power

18. The general power confers power on a local authority to do things for a commercial purpose only if they are things which the authority may, in exercise of the general power, do otherwise than for a commercial purpose.

19. When undertaking activity for a commercial purpose, the Localism Act requires that a local authority must do them through a company.

20. 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.

Powers to make supplemental provision

21. The 2011 Act provides that if the Secretary of State thinks that a statutory provision (whenever passed or made) prevents or restricts local authorities from exercising the general power, the Secretary of State may by order amend, repeal, revoke or disapply that provision either permanently or for a particular period.

22. If the Secretary of State thinks that the general power is overlapped (to any extent) by another power then, for the purpose of removing or reducing that overlap, the Secretary of State may by order amend, repeal, revoke or disapply any statutory provision (whenever passed or made) either permanently or for a particular period.

23. The Secretary of State may by order make provision preventing local authorities from doing, in exercise of the general power, anything which is specified, or is of a description specified, in the order.

24. The Secretary of State may by order provide for the exercise of the general power by local authorities to be subject to conditions, whether generally or in relation to doing anything specified, or of a description specified, in the order.

25. Conditions may apply to

a) all local authorities,

b) particular local authorities, or

c) particular descriptions of local authority.

26. Before making supplement provisions, the Secretary of State must consult—

a) such local authorities,

b) such representatives of local government, and

c) such other persons (if any), as the Secretary of State considers appropriate.

Wales

Local Government and Elections (Wales) Act 2021^[25]

27. Section 24 of the Local Government and Elections (Wales) Act 2021 provides a general power of competence to qualifying local authorities in Wales.

28. The general power gives all principal councils and certain community councils, the same powers to act that an individual generally has, thus enabling them to do things that are unlike anything they, or any other public body, have done before.

29. It is not necessary for activities undertaken using the general power to benefit the qualifying local authority itself, its area or residents; however, there is no restriction on the activities doing so. In using the general power a qualifying local authority may undertake activities anywhere, including both in and outside of Wales.

30. The general power can be used by qualifying local authorities to, for example, act in their own financial interests, for a commercial purpose, or for a charge.

31. Unlike in England where the general power operates alongside the power to advance well-being, in Wales the well-being power will no longer apply to Welsh local authorities once the general power is commenced.

Boundaries of the general power

32. The general power does not provide qualifying local authorities with the ability to bypass existing prohibitions, limitations or restrictions in legislation passed by the Senedd or UK Parliament on, or before, the day on which this section comes into force.

33. The general power also does not provide qualifying local authorities with the ability to bypass prohibitions, limitations or restrictions in legislation passed by the Senedd or UK Parliament after this section comes into force, if that legislation states that it applies to:

• the general power;
• all of the qualifying local authority’s powers; or
• all of the qualifying local authority’s powers except for certain powers, and the general power is not listed as one of the excepted powers.

34. The general power may not be used to delegate or contract out any of a local authority’s functions or to alter its governance arrangements, which remain subject to separate statutory provision

Limits on charging in exercise of general power

35. If using the general power to provide a service, a qualifying local authority may only charge for that service if that service is discretionary, i.e. not a service the authority is under a statutory duty to provide; and the recipient has agreed to the provision of the service.

36. A qualifying local authority may not profit in any financial year when using the general power to charge for a service, unless the service is provided for a commercial purpose. However, subject to that limitation, a qualifying local authority may set charges as it sees fit, including only charging some people for the service or charging different people, or groups of people, different amounts.

Limits on doing things for commercial purpose in exercise of general power

37. A qualifying local authority may use the general power to carry out an activity for a commercial purpose only if the activity is one the authority could also rely on the general power to carry out for a non-commercial purpose.

38. A qualifying local authority cannot carry out an activity in respect of someone for a commercial purpose, if the authority is required by legislation to carry out that activity.

39. If a qualifying local authority wishes to use the general power to do something for a commercial purpose, it must do so through a company or a registered society.

40. Local authorities have a duty to have regard to guidance issued by the Welsh Ministers about exercising the general power of competence to do anything for a commercial purpose.

Power to make supplementary provision

41. The Welsh Ministers may make regulations removing or changing statutory provisions that they think prevent qualifying local authorities from using the general power or obstruct them when using the general power.

42. The Welsh Ministers may make regulations removing overlaps between the general power and other powers (although this cannot be achieved by revising or cutting back the general power itself).

43. The Welsh Ministers may make regulations restricting what a qualifying local authority may do under the general power or making its use subject to conditions.

5.1 The Welsh Ministers may make regulations in respect of all qualifying local authorities, specific qualifying local authorities, or a type of qualifying local authority.

44. Before exercising any of these powers, the Welsh Ministers must consult with whichever qualifying local authorities they consider appropriate, any representatives of principal councils and community councils they consider appropriate, and any other persons they consider appropriate.

45. The duty to consult does not apply in respect of any regulations which merely amend earlier regulations so as to:

• extend their application to a specific authority or group of authorities;
• reduce their application so they stop applying to a specific authority or group of authorities.

Northern Ireland

Local Government Act (Northern Ireland) 2014^[26]

46. The Local Government Act (Northern Ireland) 2014 provides local authorities in Northern Ireland with a general power of competence, described as “power to do anything that individuals generally may do…even though they are in nature, extent or otherwise unlike anything the authority or other public bodies may otherwise do… in any way whatever, including:

(a) power to do it for a commercial purpose or otherwise for a charge, or without charge, and

(b) power to do it for, or otherwise than for, the benefit of the authority, its area or persons resident or present in its area.

47. A provision is included that resolves any potential conflict with other statutes by stating that the general power is not limited by the existence of any other power of the authority which (to any extent) overlaps the general power.

Boundaries of the general power

48. The general power is limited by any restrictions imposed by a pre-commencement power in so far as it is overlapped by the pre-commencement power.

49. The general power does not enable a local authority to do anything which the authority is unable to do by virtue of a pre-commencement or post-commencement limitation (a prohibition, restriction or other limitation expressly imposed by a statutory provision).

50. The general power does not confer power for a local authority to:

• make or alter arrangements for the discharge of its functions by committees, joint committees, officers etc);
• make or alter arrangements for local authority governance;
• make or alter any contracting-out arrangements.

Limits on charging in exercise of general power

51. Limits apply where a council provides a service otherwise than for a commercial purpose.

52. 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.

53. A local authority cannot trade in services it has a statutory duty to provide.

54. A local authority cannot use the general power to profit from charging for services. 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.

Powers to make supplemental provision

55. If the Department thinks that a statutory provision (whenever passed or made) prevents or restricts councils from exercising the general power, the Department may by order amend, repeal, revoke or disapply that provision.

56. If the Department thinks that the general power is overlapped (to any extent) by another power it shall seek to remove or reduce that overlap, taking into account the views of the bodies exercising the overlapping powers.

57. The Department may by order amend, repeal, revoke or disapply any statutory provision (whenever passed or made).

58. The Department may by order make provision preventing councils from doing, in exercise of the general power, anything which is specified, or is of a description specified, in the order.

59. The Department may by order provide for the exercise of the general power by councils to be subject to conditions, whether generally or in relation to doing anything specified, or of a description specified, in the order.

60. Before the Department makes an order under this section it must consult—

(a) such associations or bodies representative of councils;

(b) such associations or bodies representative of officers of councils; and

(c) such other persons or bodies, as appear to the Department to be appropriate.

61. If, following consultation, the Department proposes to make an order under this section it must lay before the Assembly a document explaining the proposals and, in particular—

(a) setting them out in the form of a draft order; and

(b) giving details of consultation under subsection (6).

Limits on power to make supplemental provisions

62. The Department may not make provision unless:

(a) the effect of the provision is proportionate to the policy objective intended to be secured by the provision;

(b) the provision, taken as a whole, strikes a fair balance between the public interest and the interests of any person adversely affected by it;

(c) the provision does not remove any necessary protection;

(d) the provision does not prevent any person from continuing to exercise any right or freedom which that person might reasonably expect to continue to exercise;

(e) the provision is not of constitutional significance.

63. An order under this section of the Act may not make provision for the delegation or transfer of any function of legislating.