Select Committee on Delegated Powers and Deregulation Twelfth Report


Memorandum by the Department of the Environment, Transport and the Regions


1.  The Local Government Bill received its First Reading in the House of Commons on 30 November 1998 and was introduced to the House of Lords on 25 March 1999. This memorandum summarises the main provisions of the Bill and gives an overview of the delegated powers. It then identifies each of the powers; describes its purpose; explains why the matter has been left to delegated legislation; and explains the degree of Parliamentary control.


2.  Part I of the Bill consists of 28 clauses. The purpose of Part I is two-fold. Firstly, it subjects most bodies within the local government finance system in England and Wales to a new duty to make arrangements for the achievement of best value in the performance of their functions.

3.  Secondly, Part I provides for the abolition of Part III of the Local Government, Planning and Land Act 1980, Part I of the Local Government Act 1988, and certain provisions within the Local Government Act 1992, which require certain defined authorities—including councils and police and fire authorities—to subject certain work to Compulsory Competitive Tendering (CCT).

4.  The purpose of Part II of the Bill, which contains two clauses and a Schedule, is to enable the Government to regulate increases in council tax. Part II will firstly repeal the existing capping legislation used for this purpose and take reserve powers that are more flexible. As with the existing legislation, the powers will be exercised on the basis of the budget requirement. Secondly, Part II will make provision for payments between tiers of authorities so that any shortfall in council tax benefit arising from excessive increases in council tax falls on the authority responsible.

5.  Part III of the Bill consists of a further five clauses and a Schedule which contain no further delegated powers.

6.  The Explanatory Notes, which were first published on 1 December 1998 and reprinted with appropriate revisions on 26 March 1999, provide detailed information about the background to these provisions, their purpose and effect.


7.  Paragraphs 11-18 of this memorandum set out the general approach to the framework for best value which this legislation provides, and the rationale for the conferral of delegated powers in Part I of the Bill. The relevant clauses are then considered in paragraphs 19-124, with an explanation of the context of each of the delegated powers as well as the procedures for Parliamentary scrutiny. Part II of the Bill is covered is paragraphs 125-148.


8.  Throughout the Bill, the Government has sought to achieve some proportionality between the extent of powers and the level of scrutiny to which they are to be subjected. For instance, where powers in the Bill materially impact upon other legislation (such as those set out at clauses 15, 17 and 18), the Government believes it is only proper that these should be subject to scrutiny under the affirmative resolution procedure by both Houses of Parliament in relation to their operation in England.

9.  In Wales, powers under clauses 15 and 17 will also be subject to affirmative resolution, as the powers in question have not been transferred to the National Assembly and Parliament retains a scrutiny rôle. In relation to clause 18, however, the order-making powers are vested in the National Assembly and subject to the procedures set out in the consideration of clause 28 below.

10.  In relation to key elements of the best value process such as those set out in clauses 4, 5 and 6, there is no such impact upon other legislation; the approach to scrutiny should ideally build in a consideration of the views of those best value authority practitioners who will be most directly affected by them. Each of clauses 4, 5 and 6, as affected by the provisions set out at subsection 27(2), provide for negative resolution of any orders made under them; clause 24 further stipulates that before issuing guidance, the Secretary of State shall consult best value authorities and those bodies appearing to him to represent them. The Government believes this to be an appropriate, and at the same time comprehensive, level of scrutiny for these powers.



11.  The legislative framework creating the duty of best value is set out in Part I of the Bill. This sets out:

  • the list of bodies which will be subject to the duty;
  • the general duty of best value itself;
  • the key aspects of best value process which all best value authorities will be expected to carry out;
  • arrangements for audit and inspection;
  • the framework for creating new powers;
  • arrangements for the transition from CCT to best value;
  • miscellaneous provisions including changes to relevant police legislation, creation of an accounting framework, and specific arrangements for the application of the duty of best value in Wales.

12.  The Government is determined, in putting in place the new duty of best value, not to repeat the very prescriptive approach which it considers was a key feature of CCT legislation. Instead, it wishes to create a framework which gives best value authorities as much flexibility in the management of their functions as possible, and which allows them to balance the need for some consistency nationally with the need to take proper account of local circumstances and the priorities of local people.

13.  It also wishes to make sure that the duty of best value works in such a way that local government has the capacity to forge closer relationships with local business communities and other agencies in order to deliver local services in the most efficient and effective manner possible.

14.  The Government believes that these objectives are best served by ensuring that the legal framework is transparent, facilitates meaningful comparisons and ensures that the pace at which improvement is achieved is driven by what the best authorities are able to do.

15.  The introduction of a duty of best value is only the first of a range of measures which the Government intends to take in order to modernise local government. In doing so, it aims to make local government more relevant, and more responsive to the needs of the public which they serve. Put simply, the Government believes that local people should have a proper voice in determining what kind of services they receive, and should be entitled to expect high quality services no matter where they live.

16.  This Bill therefore puts a high premium upon the importance of consultation with the local community. It creates a specific statutory duty of consultation at clause 3, which embraces all sections of that community. It creates a general duty of best value which is owed to local people, not to the Secretary of State. And it places authorities under a statutory duty to report to their local communities not only what they have achieved but also their plans for the future, and how their plans and their performance compare with the achievements of others.

17.  The Government also recognises that it is legislating in this Bill for a rich diversity of individual authorities, carrying out different functions to different timetables. It is therefore important that the legislation is permissive, allows for the development of a wide range of approaches to service delivery, and is capable of evolving over time. This is especially important in view of the work which is being carried out by the best value pilot projects in England and Wales. The Local Government Association and the Audit Commission will identify and disseminate information about what works well in practice. The legal framework needs to be able to reflect this.

18.  The Bill also makes appropriate provision for flexibility in terms of the way that best value is introduced in Wales. The way in which it provides powers to the National Assembly for Wales is consistent with the terms of Welsh devolution set out in the Government of Wales Act 1998: the Bill provides, in most but not all cases, for references to the Secretary of State to be substituted by a reference to the National Assembly. Most importantly, it provides the Assembly with the discretion it needs to ensure that the duty of best value in Wales is introduced in a timely manner which nevertheless reflects local circumstances.

The Powers


19.  Clause 2 provides the Secretary of State with order-making powers to either:

  • extend the application of best value to new bodies, or to accommodate new circumstances; or
  • disapply the duty in relation to specified functions, if certain criteria are met.


20.  The Local Government White Papers*[7] made it clear that the Government intended to apply the duty of best value to local government bodies that enjoy tax-raising or precepting powers (including the Greater London Authority (GLA) and its constituent bodies, subject to the passage of the Greater London Authority Bill which is also currently before Parliament), and also levying bodies (such as combined fire authorities).

21.  Clause 1 sets out those bodies to which the Government wishes to apply the duty immediately. But it also wishes to have flexibility to extend the scope to any new precepting and levying bodies which are created in the future. Examples of bodies to which the duty might be applied in this way include the London Magistrates Court Authority and the London Pension Fund Authority, although decisions on this have yet to be taken.

22.  The Government has also taken powers at subsection 2(4) which are designed to ensure that the duty of best value applies to as much of the work of the GLA as possible. At present the Bill, through clause 1, applies the duty of best value to the GLA, insofar as it exercises its functions through the Mayor, and to each of its four subsidiary bodies: the Metropolitan Police Authority (MPA), Transport for London (TfL), the London Development Agency (LDA) and the London Fire and Emergency Planning Authority (LFEPA).

23.  However, the Government recognises that it may be appropriate, in due course, to apply the duty of best value to:

  • functions exercised by the Assembly of the GLA (which may include corporate functions such as recruitment of personnel); or
  • functions which the Mayor and Assembly exercise jointly; or
  • functions where one of more of the GLA bodies combine together, or with other best value authorities, to deliver them together.

24.  An example of the last might be the relationship between the Mayor and TfL, where the Mayor retains responsibility for the exercise of a strategic rôle as regards transport and TfL retains the responsibility for operational transport matters. The Government believes that the duty of best value should be capable of being applied to each body in respect of the functional rôle it carries out.

25.  The precise nature of these relationships remains to be finalised, and the Committee will be aware that the primary legislation creating the GLA is currently passing through Parliament. But in framing clause 2 as currently drafted, the Government believes it has ensured that the duty of best value will be capable of being applied to the fullest possible range of the work of the GLA, with clear lines of accountability being preserved for each of the key components of it. The order-making powers in subsection 2(4) are clearly crucial to this.


26.  It is the Government's intention that the duty of best value should apply as broadly as possible. Nevertheless, it recognises that to apply the full duty to some smaller bodies will, in certain cases, be onerous. And in certain cases there may be a rationale for exempting certain functions from the duty in particular classes of authority.

27.  The most practical example of this is the position of town and parish councils in England and community councils in Wales. The Local Government White Papers set out the Government's intention to exempt the smaller bodies of this type by applying a financial threshold, based on annual expenditure, below which the duty would not apply. The Government takes the view that this financial threshold would need to be carefully chosen, and capable of review to take account of changing circumstances.

28.  It is therefore not attracted to naming specific bodies, or setting a specific financial threshold upon the face of the Bill. It prefers to introduce variations in the duty of this type by order, in much the same way as was used under subsection 6(3) of the Local Government Act 1988 to set de minimis levels for professional services which were subject to CCT. Order-making powers under subsection 2(5) will enable the Government to achieve its objectives in a way that takes account of the different circumstances in which local government bodies operate, and which can be adjusted over time to take account of how best value operates in practice. The Government is already in consultation on these matters with the Local Government Association (LGA), the National Association of Local Councils, the Society of Local Council Clerks, and the Audit Commission. A similar consultation process is underway in Wales with the Welsh Local Government Association, the Association of Community and Town Councils, and the North Wales Association of Town Councils.

29.  Clause 2 is significant in that the use of the order-making powers within it can materially affect the extent of the duty of best value, either by extension or disapplication. In view of this, the Government believes that the use of order-making powers should be subject to affirmative resolution by both Houses of Parliament. Subsection 2(6) provides for this in respect of England. The position in Wales is considered in relation to clause 28 below.


30.  Clause 4 provides the Secretary of State with order-making powers to specify performance indicators and performance standards in respect of a best value authority's functions; clause 26 provides that such orders should be subject to negative resolution.

31.  In developing this policy, the Government has adopted the following definitions:

  • Performance indicators are a measure of an authority's performance.
  • Where appropriate, performance standards would set out the minimum acceptable level of service provision.

32.  To deliver best value, authorities will need to establish where improvements are most needed. To do this, they will need to be able to assess their performance, know what local people think of that performance, and show how performance compares to that of other authorities.

33.  Under the new framework, three bodies will have the power to set performance indicators:

  • The Government will set national performance indicators for the main functions, reflecting the national interest in local services.
  • The Audit Commission will retain its powers under the Audit Commission Act 1998 to specify indicators. The Government expects it to set indicators which would provide a more rounded view of performance around the national set of indicators. The Government will seek to agree a memorandum of understanding with the Audit Commission to make their respective rôles clear.
  • Best value authorities will be expected to set their own local performance indicators, to reflect local characteristics and local priorities. The Government expects these indicators to outweigh the number of prescribed national indicators.

34.  Clause 4 allows the Secretary of State to specify different indicators and standards for different authorities, and to apply these at different times, with the aim of promoting improvement in the way authorities carry out their functions, having regard to a combination of economy, efficiency and effectiveness. The Government will have regard to the views of the Audit Commission in developing those indicators and standards. Government amendments at Commons Report stage, in response to debates in Committee, have provided for wide consultation with local government, the Audit Commission and others in this respect.

35.  The Government believes that order-making powers are the most appropriate method of putting this system in place. It is likely that the suite of indicators and standards which the Secretary of State will specify will change over time (in practice, there could be annual revisions). For this reason, it would not be practicable to place the individual indicators and standards on the face of the Bill. Nor would guidance be sufficient: it would offer flexibility, but it would not have the same force. The Government considers it essential that the indicators and standards specified by the Secretary of State are applied consistently by best value authorities. The information so provided will offer a means of comparison between authorities (both for local people and for authorities themselves), and a means of judging the progress that is being made by individual authorities. If the elements of this framework are not consistent, the whole performance management system will be undermined.

36.  The Audit Commission currently has a duty (which it will retain), under Sections 44 and 46 of the Audit Commission Act 1998 to give such directions as it thinks fit for requiring relevant bodies to publish information relating to their activities in any financial year. This is to be information that, in the Commission's opinion, will facilitate the making of appropriate comparisons between standards of performance achieved by different relevant bodies in that financial year, and the standards of performance achieved by such bodies in different financial years. The last such direction was issued in December 1998.


37.  Clause 5 of the Bill is concerned with best value reviews. It indicates the main elements which may make up reviews, and sets out the Secretary of State's powers in respect of them. The review process is a crucial part of best value, ensuring local authorities consider the key options for improving performance.

38.  In normal circumstances, the inspection process which is set out at clauses 10-13 of the Bill will scrutinise the manner in which best value authorities carry out best value reviews, and the outcomes which flow from them in terms of performance targets and action plans. The objectivity of that scrutiny will in large part be informed by the extent to which best value reviews are broadly consistent in terms of the processes which they undertake and the rigour with which they are carried out.

39.  Clause 5 achieves that broad degree of consistency by providing for four powers to be exercised by the Secretary of State:

  • subsection 5(2) enables the Secretary of State to specify by order a period within which an authority is to review all its functions;
  • subsection 5(4) enables the Secretary of State to specify by order matters which an authority must include in a review of a function;
  • subsection 5(5) provides that the Secretary of State may issue guidance on the timing, procedure, form and content of a review;
  • subsection 5(7) further provides that guidance may state matters to be taken into account in setting performance targets.

40.  If improvements are to be made, and fair and proper comparisons between different best value authorities achieved, the timetable for the reviews will need to be both demanding and consistent in application. It is therefore planned that initially the period of review should be set at five years. However, the Government is not persuaded that this period should appear on the face of the Bill. On occasions there may be circumstances which merit an individual authority or group of authorities being given a different time period over which to complete their reviews. Although five years will be the norm, the Secretary of State needs to have the ability to consider such cases, and to vary requirements where it is appropriate. The discretionary power set out at subsection 5(2) allows for this.

41.  In carrying out reviews, it is essential that all authorities address certain key factors and genuinely challenge the status quo. The degree of rigour involved in best value should be the same for all. The Government believes that the best way to ensure this consistency is to set down these key elements by means of a statutory instrument. It does not consider it appropriate to detail these key elements on the face of the Bill since their content will evolve over time on the basis of experience. Lessons will be learnt as the first reviews are completed, and there must be the flexibility to alter the key requirements to reflect these, as well as to incorporate best practice as it emerges. The Government believes that the order-making powers set out at subsection 5(4) are the most appropriate means of achieving these policy objectives.

42.  By the same token, it is not possible to anticipate all the circumstances that need to be addressed in the reviews, and the Government needs to be able to react flexibly and sensibly to reflect the different approaches to best value reviews which develop over time. The guidance powers as set out at subsections 5(5) and 5(7) allow for this. Appropriate guidance—such as that arising from the work being done by the best value pilots—and advice reflecting the lessons learnt as the first and subsequent reviews are undertaken will be necessary as authorities go forward. It is essential that the Government has the ability to issue guidance covering the form and nature of review activity, including the setting of appropriate performance targets and the manner in which reviews should be carried out and reported upon.


43.  Local Performance Plans (LPPs) are a key output from the best value process, as they will be the principal means by which best value authorities are held accountable to local people for the delivery of best value.

44.  The LPP should be a readily accessible, transparent document which provides an accurate picture of what an authority has achieved, the extent to which it has met targets, its future plans for improvement and how its performance compares with that of others.

45.  Clause 6 includes the following powers:

  • at subsection 6(2), order-making powers for the Secretary of State in respect of matters to be included in a performance plan;
  • at subsection 6(3), power to vary the date by which the plan must be published, again by order;
  • at subsection 6(4), power for the Secretary of State to issue guidance on the form and content of plans.

46.  As with best value reviews, the proper scrutiny of LPPs will be most effective and objective if it is carried out against a set of broadly consistent criteria. For this reason the Government believes it is important that all authorities include a common set of key elements in their LPPs. Only in this way can local people properly judge the improvements that are being made in the delivery of services, and compare them with those being achieved elsewhere. The Government does not believe it is sensible to include these key elements on the face of the Bill because LPPs, if they are to be effective will, like best value reviews, need to evolve over time. Lessons will be learnt as the first plans are published and flexibility is required to alter the key requirements to reflect these as necessary.

47.  The Bill, at subparagraph 6(3)(a), provides that LPPs must be published by the authority by 31 March each year, for the financial year that follows. The Government considers this an appropriately challenging date which will ensure that local people will have key information available to them at the start of the year and in good time for any local government elections.

48.  The Government also recognises that there may be circumstances when it might be appropriate to vary the 31 March publication date. This might arise if the timetable for reviewing functions, collecting performance information or auditing of the plan needed to be adjusted in the light of practical experience. The ability to vary the date by order is therefore a prudent measure which ensures that as best value evolves, the legislative framework is sufficiently flexibly drawn to accommodate it.

49.  In Wales, it will be for the Assembly to determine whether to introduce the 31 March deadline set out at subsection 6(3)(a), or whether to vary the date by order under subparagraph 6(3)(b).

50.  Subsection 6(4) enables the Secretary of State to issue guidance on the form, content and manner of publication of LPPs. Many of the considerations regarding format, content and publication of LPPs will be left for local determination. However, appropriate guidance—such as that arising from the work being done by the best value pilots and advice reflecting the lessons learnt as the first and subsequent plans are published—will be invaluable in building on the effectiveness of LPPs. As LPPs are to be assessed by auditors for compliance with best value, any guidance that establishes some common guidelines will inevitably assist in this process.


51.  Subparagraph 7(6)(a) specifies that the best value auditor should send a copy of his report on the LPP to the best value authority concerned by 30 June each year, following publication of the plan in question (which has to be done by 31 March). Subparagraph 7(6)(b) further provides that the Secretary of State may vary the date by order. In Wales, it will be for the Assembly to determine whether to introduce the 30 June deadline set out at subparagraph 7(6)(a), or whether to vary the date by order under subparagraph 7(6)(b).

52.  The Bill specifies 30 June as the date by which LPPs have to be audited, in order to balance the need for a prompt commentary on the plan with the need to allow auditors sufficient time to make an objective assessment of it. However, it seems prudent to allow for the possibility of the date being varied for a number of reasons. The date set needs to have regard to the date of publication of the LPPs, which could also be varied by order in the Bill as drafted. As explained in the context of clauses 4-6 above, the best value framework has been designed so that it can respond to, and evolve in line with, practical experience. There may in future be changes to the way in which plans are prepared or accounts audited which would make an earlier or later date preferable for the production of an accurate and informative plan. The Government therefore wishes to retain the flexibility inherent in these delegated powers and believes that the negative resolution procedure provided for in clause 27 is reasonable in this case.


53.  Subsection 8(4) provides for the Audit Commission to prescribe a scale of fees for the audit of LPPs. Before doing so, the Commission is required under subsection 8(6) to consult both the Secretary of State and persons appearing to it to represent best value bodies.

54.  The provisions are subject to the same conditions contained in subsections 7(3) to 7(8) of the Audit Commission Act 1998. Subsection 7(8) of that Act provides that the Secretary of State may by regulations prescribe a scale of fees to have effect in place of those prescribed the Audit Commission; subsection 52(3) provides that such regulations shall be subject to annulment in pursuance of a resolution in either House of Parliament.

55.  When using subsection 7(8) of the 1998 Act, the Secretary of State of State is required under subsection 8(7) of the Bill to consult the Commission and persons appearing to the Secretary of State to represent best value bodies. This provision allows for the protection of best value bodies in the event that the Commission prescribed an excessive fee scale. However, it may help the Committee to clarify that it has never been used in practice for audits under the 1998 Act.


56.  Clause 10 of the Bill sets out the broad framework of powers for best value inspections. The Government believes that its policy objectives are best served by a robust and independent system of scrutiny of the manner in which best value authorities comply with the duty of best value; inspection is very much part of this. The decision to provide the powers of inspection to the Audit Commission under subsection 10(1) has been taken in the light of its status as an independent non-departmental public body, and its acknowledged expertise in undertaking comparative studies of local government and in addressing value-for-money issues.

57.  Subsection 10(2) further provides that the Secretary of State may direct the Audit Commission to inspect an authority's compliance with the duty of best value.

58.  Inspection will provide a way of checking that an authority is applying best value appropriately to each function. It allows for the performance of an individual service, for example, to be considered in detail, and scrutinise an authority's own fundamental performance review. Under normal circumstances there will be a programme of inspections drawn up in advance which will allow an authority's own timetable for reviews to be taken into account. The facility for the Secretary of State to direct the Audit Commission to carry out an inspection will be used only where he has concerns about the way in which a function is being carried out. Such concerns may reach him in a number of ways—such as a press campaign, representations by local people, or as a result of a police investigation. In such cases the Secretary of State may judge it inappropriate to wait for the planned programme of inspection; a timely and rigorous study may be the best way to ensure that local stake-holders receive best value for that particular service, or to decide whether it is appropriate to exercise powers of intervention as provided for under clause 14.

59.  Further details as to how intervention will work in practice is set out in the draft Protocol which is attached at Annex A. This draft Protocol has been developed for England, and separate discussions on a suitable format for a similar Protocol are underway in Wales.

60.  Subparagraph 10(4)(b) allows the Secretary of State to issue guidance on the conduct of inspections. The Audit Commission will use the powers conferred on it by the Bill to work alongside other existing statutory inspectorates which specialise in services or sectors—such as OFSTED and the Social Services Inspectorate. The Government attaches great importance to the professionalism and independence of all the inspectorates. The purpose of the guidance will be to ensure that the Audit Commission has due regard to national and local priorities, and to ensure that its remit complements that of the existing inspectorates. The Secretary of State will be required to consult authorities and the Commission before issuing guidance, and must arrange for that guidance to be published.

61.  These statutory requirements will sit alongside a non-statutory Inspectorate Forum, operating separately in England and Wales, which will be established to discuss common inspection interests and ensure the smooth and efficient operation of the inspection process.


62.  Clause 12 allows the Audit Commission to prescribe a scale or scales of fees for best value inspections. The Commission is obliged to consult both the Secretary of State and persons representing best value authorities before setting a scale of fees. Whilst this power is for the Audit Commission rather than the Secretary of State, the Government recognises concern that this power is delegated; it is important, however, that the inspected authorities share the costs of inspection. Provision is also made for part of the funding to be provided by grant from central government (DETR or the National Assembly for Wales).

63.  The Government believes that the flexibility allowed by subsection 12(3) is necessary to allow for variations in the complexity and sensitivity of different inspections. Where a service has a history of problems, for example, or the authority has radically changed its approach, it may be clear that the fee will need to be higher than usual. On the other hand, where a service is not outstandingly significant or where the review process has been well documented, the inspection may be tailored accordingly with an appropriately smaller fee. The Government believes that the consultation process prescribed by subsection 12(4) will ensure that the scale of fees, as well as being flexible, is also appropriate and affordable.


64.  Clause 13 sets out the manner in which the Audit Commission reports on any inspection of a best value authority which it carries out. Subsection 13(3) places the Commission under an obligation to send a copy of an inspection report to the authority concerned, and clause 13 provides the Commission with a discretionary power to publish the report and any information in respect of it. This extends its powers to publish information as set out in the Audit Commission Act 1998, but it is important that the Commission, in pursuing its functions under best value, should be able to publish information relating to those functions where i6t views publication to be in the public interest.


65.  Clause 14 provides the Secretary of State with new powers to intervene in 'failing' authorities to secure compliance with Part I of the Bill. It provides him with a range of measures to allow for flexible and constructive intervention to address serious and persistent failure in the delivery of services by best value authorities. Given the seriousness of the issues that could be involved, the Government takes the view that these powers should be exercised by Ministers rather than by the Audit Commission itself. It is also important not to leave auditors and inspectors as both judge and jury where action is needed. The range of possible measures has been cast widely so that the form and nature of intervention can be matched against the degree of seriousness of the failure. The Government believes that this will allow for a measured approach to intervention, with the most significant action reserved only for the most serious cases of failure.

66.  Subsection 14(2) contains provisions for relatively minor intervention right through to more significant intervention. It provides the Secretary of State with powers to direct a best value authority to undertake actions to secure best value. This includes requiring an authority to, for example, prepare or amend a performance plan or follow specified procedures in relation to a plan.

67.  Although this clause contains new powers, there are precedents for powers of the sort set out in subsections 14(2) and 14(5). The School Standards and Framework Act 1998 provides powers similar to those contained in subsection 14(2) for the Secretary of State for Education to intervene in failing local education authorities; the Local Government Act 1998 and the Local Government (Contracts) Act 1998 all contain provisions for work to be re-tendered or other action to be taken. Under section 9 of the Social Security Administration (Fraud) Act 1997, the Secretary of State may require an authority to contract out all or part of its Housing Benefit/Council Tax Benefit administration.

68.  In addition, there are provisions for the Secretary of State to take over a function from an authority under section 164 of the Housing Act 1985 (previously in section 23 of the Housing Act 1980). In the case of Norwich City Council versus the Secretary of State for the Environment (1982), the Secretary of State decided to use this power; Norwich Council commenced judicial review proceedings against the Secretary of State, but lost the case. This case illustrates when and how the Secretary of State is justified in using the powers under section 164 of the Housing Act 1995. Although the powers are more restrictive than those in subsection 14(5) of the Local Government Bill and can only be used in a limited set of circumstances, there is clearly a precedent for this type of intervention.

69.  Subsection 14(5) could be used to address more substantive failures including serious and long-term systemic failure, where the authority has failed to act despite having been given the opportunity to do so. Intervention using these powers may be on a longer time-scale, although it need not always be so. This is a more radical form of intervention where the Secretary of State could exercise himself the function of the authority, or nominate another body to do so on his behalf. The Secretary of State would in these circumstances be responsible for the discharge of the authority's functions.

70.  The type of circumstances in which the powers contained in subsection 14(5) might be used include cases where an authority has continued to fail to meet an important national performance standard, or has persistently and excessively high unit costs (by comparison with other councils) which are not necessarily offset by higher quality services or explained by a greater level of need. These powers could also be used as a last resort if an authority refused to draw up and implement an action plan following a critical inspection report, where action was considered essential.

71.  These powers will be used as a last resort, and authorities will normally be given the opportunity to address problems themselves before any direction is issued under this clause. In some cases the severity or persistence of failure, or the continuing risk of harm or financial loss, may show that urgent intervention is necessary. If these circumstances prevail, and an authority could reasonably be expected to be aware of the problems and has failed to take action to address them, then subsection 14(8) provides the Secretary of State with the discretion to abbreviate the intervention procedures as he sees necessary. When intervening in this way, subsection 14(9) provides that the Secretary of State must notify the authority and the representatives of best value authorities of the intervention that is necessary, and provide a full explanation of his reasons for curtailing the procedures.

72.  There are a number of safeguards to ensure that intervention powers are not used in an arbitrary manner or otherwise abused. The Bill provides authorities with the opportunity to make representations about the report (if any) as a result of which intervention is proposed and about the nature of the intervention proposed, except in the most urgent of cases where the abbreviated procedures are used. The Secretary of State must have regard to any statement of action produced under subsection 9(2). These provisions would allow the authority's views to be heard and provide it with the opportunity to act itself to improve its performance.

73.  Subsection 14(3) provides the Secretary of State with the power to direct a local inquiry to be held into the exercise of specified functions by a best value authority. This serves two important purposes: it enables the Secretary of State to ensure that he has all the relevant facts and information before intervening; and it provides for the views of local people to be taken into account. Subsection 14(4) provides that an inquiry which the Secretary of State directs to be held under this section will be subject to subsections (2) to (5) of section 250 (inquiries) of the Local Government Act 1972.

74.  Non-statutory safeguards will take the form of a Protocol on Intervention which will be agreed between central government and the LGA under the Framework for Central Local Partnership (a copy of the draft protocol is at Annex A). The Protocol will set out the principles underpinning intervention and the broad procedures to be followed by both parties.

75.  The concept of proportional response is one of the key principles of the Protocol. The draft Protocol recognises that the form and extent of intervention should reflect the type and seriousness of failure and the need for effective improvement. There is also an overriding requirement for the Secretary of State to exercise his powers in a reasonable manner, and such decisions could be tested by judicial review.

76.  Another important principle is that the Secretary of State must always inform an authority of the reasons for intervention before using his powers under best value legislation. A further principle reflects the wish to give authorities the opportunity to make the necessary improvements themselves before intervention is taken further. This approach has the added benefit of ensuring that there is a clear link between the seriousness of failure and the nature of the intervention in respect of it.

77.  The Protocol also contains a section on the rôle of the LGA in helping authorities at risk of failure.


78.  Clause 15 gives the Secretary of State order-making powers to modify or exclude the application of enactments to best value bodies or to confer new powers on them where this would assist them to comply with the duty of best value. In addition, he will have the power to impose conditions on the way authorities exercise any new or modified powers conferred in this way. These powers will not be conferred upon the National Assembly for Wales: the Government takes the view that such powers should be exercised by Ministers accountable to Parliament. In recognition of the powerful nature of these provisions, the Bill provides for affirmative resolution of orders made under this clause, as part of a robust scrutiny process.

79.  The purpose of these powers is to ensure that best value authorities are able to consider as wide a range of service delivery options as possible in meeting their responsibilities for best value. Given the quickening pace of technological and other forms of change, the Government wishes to be in a position to respond quickly and flexibly to enable local authorities to secure potential benefits for local people.

80.  Local authorities have accumulated their powers and responsibilities gradually over the years. Ancillary powers have generally been conferred in an ad hoc way to support new functions taking account of past methods and current practice. Experience has shown that where authorities have tried to develop new ways of delivering their responsibilities, existing powers have been inadequate to deal with changed circumstances. At times, the law has appeared to be unclear; at other times it has hindered necessary innovation. Best value is intended to encourage innovation—for example, by promoting new methods of service delivery which are more responsive to the needs of the user.

81.  Key areas where action might be taken are arrangements for the pooling of budgets and other resources between best value authorities and other public sector bodies, and specific powers to form companies and other vehicles for joint ventures and partnerships. Further examples of potential changes to existing legislation and the new ways in which authorities might be empowered are discussed at Annex B. With the power to set conditions in this context, the Secretary of State will be able to ensure that any new arrangements will not expose public funding to unacceptable risk, or give authorities undue advantage in the market-place.

82.  The high degree of flexibility which will be required argues against detailed provisions on the face of the Bill. However, these are very powerful provisions and the Government believes that it is right that they should be subject to stringent scrutiny. The provisions themselves are modelled to an extent on the Deregulation and Contracting Out Act 1994, as are the scrutiny arrangements. Clause 16 of the Bill, for example, requires the Secretary of State to undertake full consultation on the proposals, and for the proposals and the consultation results to be put to Parliament before the order-making process itself is considered.


83.  Subsection 17(1) extends the application of section 70 of the Deregulation and Contracting Out Act 1994 to the functions of all best value authorities.

84.  Section 70 of the 1994 Act enables the Secretary of State to contract out the functions of local authorities to others. It is appropriate for all best value authorities to be able to have access to this provision in order to ensure the delivery of best value. Orders under section 70 have to be approved by resolution of both Houses of Parliament.

85.  In Wales, in line with the Government's current approach to Part II of the 1994 Act, the Bill provides that these powers will be exercised by the Secretary of State rather than the National Assembly.


86.  Subsection 18(1) enables the Secretary of State to remove non-commercial matters from the list specified in section 17 of the Local Government Act 1988. The Secretary of State already has powers in section 19 of the 1988 Act to add to the list of non-commercial matters.

87.  The exercise of any powers conferred by this clause would enable Ministers to bring local government contracting into step both with developments in public procurement practice and with the needs of best value. For example, work force matters are currently specified as non-commercial in the 1988 Act and therefore cannot be considered as far as local authority contracting is concerned. As a result, the Government takes the view that local authorities are unable to make a proper assessment of contractors' management and work force practices, on such things as training and skills, even where they are relevant to the quality and value for money of a contract. This restriction does not apply in the same way to the rest of the public sector and is a hindrance to authorities in meeting the best value duty.

88.  The Government recognises the need to use the new power carefully and with due regard to the views of local government, the private sector and trade unions. It is important that any changes are made in the interests of best value and do not offer an opportunity for unfair competition. Subsection 18(4) also requires best value authorities to have regard to any guidance issued by the Secretary of State following the exercise of the new power. This is necessary to enable Government to provide the background and rationale for the changes, and to ensure that authorities do not misconstrue the Government's purpose in revising the non-commercial matters.

89.  The Government has proposed delegated powers for this purpose because of the possibility that the definition of a non-commercial matter may need to be further revised in the future to reflect changes in public procurement practice, some of which may emanate from European legislation. The 1988 Act already provides for additional non-commercial matters to be specified by order; the proposed power will therefore balance the existing provision.

90.  In recognition of the need for appropriate scrutiny of the exercise of the power provided by clause 18, an order made under this provision will be subject to the affirmative resolution procedure in both Houses of Parliament.


91.  Clause 20 of the Bill provides for the repeal of CCT legislation on 2 January 2000.

92.  Subsection 20(2) enables the Secretary of State to issue guidance to authorities relating to the transitional period between the abolition of CCT and the introduction of the duty of best value. The Government intends to use the guidance powers under these subsections to assist authorities in managing that transition. Statutory guidance is needed to send a clear signal on the obligations of authorities during this period, as well as to ensure an orderly changeover from one regime to the other. The transition period runs from 2 January until the duty of best value is introduced, which in England is expected to be on 1 April 2000.

93.  One example of the way in which the guidance might be used is to ensure that authorities consider how procurement and contractual arrangements should be approached in the light of the early application of best value and to advise authorities on how to demonstrate the competitiveness of their service delivery during this period. This might include advice as to the way in which tendering in progress at the time of abolition might be handled so as to avoid nugatory expenditure or legal action by private sector companies.

94.  Guidance may also be needed as to how to incorporate evidence of compliance with certain CCT requirements into authorities' early best value reviews. This could provide a basis of comparison in the summaries of performance which they will be required to produce under best value. Where an authority has incurred a financial loss on a defined activity in the final year of CCT, for instance, they will wish to identify in their Local Performance Plan any action taken to bring the level of performance up to a satisfactory standard. Guidance may also be required on the accounting arrangements for the whole of the 1999/2000 financial year, to avoid two different sets of accounts for the transitional year.

95.  All guidance will be subject to consultation with interested and affected parties or their representatives, as set out in clause 25 below.


96.  Clause 21 makes a number of changes to legislation affecting the Audit Commission to take specific account of its duties and powers under best value. This Bill confers new powers and duties upon the Audit Commission, most notable in respect of best value inspections. In practice, the work may be carried out by committees, sub-committees and by officers employed by the Commission. The Commission wishes to have the ability to delegate best value work to those bodies and persons who are best placed to carry it out; subsection 21(2) provides them with the ability to do so. This power of delegation is confined in its extent to best value functions of the Commission only.

97.  The clause also provides a power to the Housing Corporation (in England, and the Secretary of State in Wales), to provide appropriate assistance and advice to the Audit Commission in relation to the Commission's relevant best value functions. Clause 21 additionally provides a power for the Commission to make payment to the Corporation in respect of any such advice or assistance it might provide. The Government believes that the Housing Corporation has a potentially useful rôle to play in best value, particularly in offering relevant expertise in the housing field to the Commission. Clause 21 gives the Corporation a clear statutory power to exercise such a rôle, at the discretion of the Audit Commission, and allows for reimbursement of the Corporation in respect of any support it provides.


98.  Clause 22 provides the Secretary of State with powers to make regulations governing how best value authorities prepare, keep and certify accounts, and about the depositing, publication, and inspection of those accounts.

99.  The Government is committed to the creation of a common, transparent accounting framework under best value. This clause should be read in conjunction with clause 19, which imposes a common requirement with regard to the publication of accounting information.

100.  In allowing the Secretary of State to make regulations governing the way in which best value authorities prepare, keep and certify accounts, the clause puts the accounting requirements for best value on a firm statutory footing; this will enable differences in financial performance to be compared.

101.  The clause closely follows the precedent set by section 27 of the Audit Commission Act 1998 in setting requirements for prior consultation by the Secretary of State. The Secretary of State will, before making regulations, consult with the Audit Commission, with best value authorities and their representatives, and with relevant professional bodies. This is a comprehensive process which allows the Secretary of State to take specific account of the work which the Chartered Institute of Public Finance and Accounting (CIPFA) and the LGA are currently undertaking to identify recommended accounting practices.

102.  Clause 22 does not alter what is current practice. Although the powers would be vested in the Secretary of State, in practice CIPFA are charged with identifying best accounting practice for inclusion in relevant Codes of Practice. CIPFA are centrally involved in the Best Value Accounts Working Group which is considering these issues, and the Secretary of State will take careful account of that Group's findings before deciding how to use these regulatory powers.


103.  Subsections 23(2) and (3) amend section 54 of the Police Act 1996 to provide new powers of inspection to Her Majesty's Inspectorate of Constabulary (HMIC).

104.  At present, HMIC has powers to inspect police forces (which are not best value bodies), but not police authorities (which are). This amendment gives HMIC a power to inspect police authorities for the purposes of best value.

105.  The Government attaches great importance to the creation of a robust system of scrutiny within the best value framework. This scrutiny is provided by arrangements set out in respect of the audit of Local Performance Plans (clauses 7-9), and of periodic inspection (clauses 10-13). All bodies subject to best value should be scrutinised as thoroughly as possible, so that local people have an objective basis upon which to judge their performance. The Government believes that HMIC has a key rôle to play in combining its knowledge of operational policing issues with the Audit Commission's skills in assessing efficiency and effectiveness.

106.  This clause is designed to encourage further joint working with the Audit Commission and give HMIC a clearly defined rôle within best value. However, the extent of the new delegated power for HMIC will be for the purposes of best value inspections only. The Government believes that a limited delegation is sufficient to enable it to achieve its policy objectives.

107.  As far as other Inspectorates are concerned, for example OFSTED and the Social Services Inspectorate, the Government has sought wherever possible to rely upon the use of existing powers wherever the Inspectorates themselves and their sponsoring Departments are of the opinion that the powers are sufficient to enable them to play an effective rôle in best value.


108.  Clause 24 gives effect to a commitment which the Government made in the Local Government White Papers in England and Wales, to take powers necessary to ensure the smooth and efficient working of the inspection process.

109.  As well as the Audit Commission, a number of existing statutory inspectorates will have an important rôle in best value. The Government attaches great importance to achieving collaboration between these bodies to ensure that sensible arrangements are made for the scheduling of inspections, development of effective methodologies and common perspectives on how best value inspections should be carried out. Such arrangements ideally should be made on a voluntary basis, and the Government will establish an Inspectorate Forum in England, and an Audit and Inspection Forum in Wales which will bring the key players together to address these issues.

110.  The Government favours this voluntary approach. But it also recognises that if voluntary arrangements are not delivering a sufficiently effective inspection process, it needs a reserve power to address any problems that might arise. Its guidance powers under clause 24 are designed for this purpose; like all other guidance powers in Part I of the Bill, the Secretary of State will be obliged to consult with relevant parties on the way in which the powers are exercised, as is provided for by clause 25. Clause 24 also provides the Secretary of State with an order-making power to add further persons and bodies to those who are subject to the guidance powers it sets out. This is a practical device to ensure that if new statutory inspectorates are created with a remit to inspect functions of best value authorities, then they can be drawn into the collaborative process and subject to statutory guidance where appropriate.


111.  Clause 25 sets out the Secretary of State's guidance powers in respect of Part I of the Bill. One of the Government's key policy objectives in framing this Bill is to avoid prescription wherever possible and to afford best value authorities maximum flexibility.

112.  However, the Government also wishes to be able to ensure that authorities approach key aspects of the best value process—such as carrying out of reviews, the production of performance plans and the setting of performance targets—in a manner which is broadly consistent, and which takes account of best practice.

113.  It is also important that the Secretary of State is able to issue guidance to, or in respect of, best value authorities generally reflecting the practical experience of those authorities who have been acting as best value pilots since April 1998. This experience is particularly valuable where, for instance, they have sought to provide services to particular groups in the community in a way which cuts across traditional boundaries and includes other agencies in tackling related social issues such as crime and disorder, drug awareness and youth employment.

114.  In practice, it is likely that guidance will be broadly similar for all types of best value authorities. But where there are significant variations in functions, the guidance will give recognition to them. County councils, for instance, carry out different functions to districts; police authorities carry out a significantly different range of functions to most other best value authorities; and the unique nature of the GLA may throw up specific issues which need to be addressed individually within guidance designed for that purpose.

115.  Clause 25 identifies and anticipates all of these needs by allowing for the issue of guidance to best value authorities generally at subparagraph 25(2)(a); for different guidance to be issued to different authorities at subparagraph 25(2)(b); and for guidance to individual authorities, also at subparagraph 25(2)(a).

116.  Guidance issued under clause 25 will generally be used to establish general principles, rather than to prescribe rules. It will be used to ensure broad consistency in approach, thus facilitating proper and meaningful comparisons, and thus ensuring that all authorities are compared against each other in a fair and non-discriminatory way.

117.  The Government thus believes that the clause serves the best interests of best value authorities, as well as furthering its own policy aims. And in order to ensure that this is the case, it has provided a further check on the use of guidance, by committing the Secretary of State to a broad-ranging process of consultation before guidance is issued, taking into account the views of individual authorities and their representatives. The Government believes that taking full account of the views of best value authorities is the right approach to test the use of powers which are primarily concerned with the way the policy operates in the field—in much the same way as, in other parts of the Bill (for example, at clauses 15 and 18), it has introduced Parliamentary scrutiny by means of the affirmative resolution procedure for provisions which potentially affect the operation of other legislation.


118.  Clause 26 provides, at subsection 26(1), that sections 1-19 and 21-25 of the Bill will commence twelve months after the Bill receives Royal Assent, unless an order makes provision for earlier commencement. Subsections 26(2) and 26(3) give the Secretary of State and the National Assembly power to commence provisions earlier in respect of England and Wales respectively. Subsection 26(4) allows for orders made under subsections 26(2) or 26(3) to appoint different days for different purposes.

119.  The approach to commencement in this clause seeks to satisfy two broad policy aims. These are:

  • to ensure that no vacuum develops between the abolition of CCT and the introduction of the duty of best value, whilst at the same time ensuring the National Assembly has discretion over the date of introduction of the duty in Wales;
  • to commence the provisions of the Bill in such a way as to give best value authorities the maximum practical help in, and opportunity to prepare for, compliance with the full duty.

120.  The Government is firmly committed to introducing the duty of best value in England by 1 April 2000. The creation of a maximum twelve-month interval between Royal Assent and the coming into force of the Act means that the Government will be able to ensure that the provisions of the Bill are brought into force within a specified period.

121.  The Government recognises that it will be helpful to best value authorities to introduce some aspects of the Bill much earlier than others. For instance, authorities preparing local performance plans (under clause 6), planning best value reviews (pursuant to clause 5), and making preparations to collect relevant data about their performance (in pursuit of clause 4) would find it easier to do so if statutory guidance and secondary legislation on these topics were introduced by the Government in sufficient time for authorities to react to them in the run-up to 1 April 2000.

122.  Conversely, there are some provisions in the Bill, notably those imposing the general duty (at clause 3), those creating new statutory duties for auditors and inspectors (clauses 7-13), and those conferring intervention powers upon the Secretary of State (clause 14) which it would probably not be appropriate to impose before 1 April 2000.

123.  Subsection 26(4) allows the Government to take a clause-by-clause approach to commencement which takes account of the contents of each clause and their purpose within the whole Bill. Subsections 26(2) and 26(3) provide for separate consideration of circumstances in England and Wales. Taken together, the order-making powers in clause 26 are designed to facilitate a smooth transition between the repeal of CCT and the application of the duty of best value.


124.  Under subsection 28(1), the National Assembly for Wales will exercise the powers in Wales that in England will be exercised by the Secretary of State; this provision excludes Assembly Orders from Parliamentary procedures. Instead, the Assembly's subordinate legislative procedures, set out in sections 64-68 of the Government of Wales Act 1998 and its Standing Orders, will apply. The Committee has already considered these procedures in its scrutiny of this Act during its passage through Parliament, concluding that "the proposed mechanism for scrutiny, which, save in cases of urgency, always requires both a cost­benefit appraisal and the affirmative procedure, is suitably rigorous". (18th Report, 1997-98, column 14).

* 7   Modern Local Government: In Touch with the People in England and Local Voices: Modernising Local Government in Wales, both published in July 1998. Back

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