Select Committee on Delegated Powers and Deregulation Twelfth Report


ANNEX B

The following pages are an extract taken from a paper which was prepared for the House of Commons Standing Committee B. This extract provides an illustration of the possible uses for the powers at clauses 15 and 17 of the Local Government Bill (as amended in the House of Commons).

POSSIBLE USES FOR CLAUSES 15—17

POSSIBLE USES FOR CLAUSE 15

Initially the Government will focus its efforts in four key areas:

  • facilitating joined-up service delivery including working across organisational boundaries to provide integrated services;
  • the development of more service delivery models with an emphasis on partnerships;
  • rationalisation of the circumstances where local authorities can provide goods and services to others;
  • making better use of local authority assets.

Our current thinking on these issues are set out below. It is our intention to develop these issues and explore their operation with representatives from business, voluntary organisations, local government, trade unions and the legal profession before a more extensive consultation in the summer. This process will also seek to test out whether the wider local government community see these as priority issues which need to be tackled for the introduction of best value. This will build on the extensive consultation on the best value framework through its Green Paper Modernising local government: improving local services through best value which lead to the publication last July of the White Paper Modern Local Government, In Touch with the People, from which the proposals set out below are taken.

Facilitating joined-up service delivery

Effective local partnerships are fundamental to the success of council's strategic role. Best value authorities need to ensure that they complement the work of a range of agencies and organisations that operate locally. Although many councils have developed links with some of the bodies operating in their area, there is often a lack of clarity over the powers of councils to participate with other stake-holders in partnership activities. To remove this uncertainty the Government wishes to consider providing clear discretionary powers for best value authorities to:

  • pool resources, money, staff, information technology, equipment and other assets including pre-existing contracts with other best value authorities and/or public sector bodies;
  • transfer funds and delegate functions to other best value authorities or public sector bodies, within an agreed framework or plan, to take lead commissioning role;
  • integrate the provision of services between best value authorities with other public sector bodies within a single provider.

Partnership service delivery vehicles

Partnership arrangements can take many forms, from contractual arrangements to joint working through to companies and other legal vehicles. These partnership vehicles can be provide a useful structure for partnerships, particularly where more than two parties are involved.

Local authorities already have some powers to form partnerships. However these powers are incomplete and there is a lack of clarity about the circumstances in which local authorities can rely on them. This climate of uncertainty has caused many local authorities to adopt a conservative approach and shy away from partnerships with the private and voluntary sectors. Those who do venture into innovative arrangements—from the public or private sectors—can run the risk of the arrangements being subject to legal challenge.

The Government's aim is to ensure that best value authorities have available to them a spectrum of partnership vehicles to choose from. Thereby ensuring a best-fit between the chosen partnership vehicle and the objectives of the partnership. Therefore as well as clarifying the law, we may wish to extend the options available for local authorities to use within the best value framework. The options include:

  • powers to establish and participate in companies; joint committees and boards and not-for-profit organisations such as companies limited by guarantee;
  • clarifying the extent to which best value authorities can have an interest in joint venture companies;
  • powers for local authorities to second or loan staff to any other body, whether public, private or voluntary.

Provision of goods and services/making best use of assets

There is legislation in specific areas empowering local authorities to sell services, goods and materials to others, including those in the private sector, for example the Civic Restaurants Act 1947. Where they do not have such powers, they may turn to the Local Authorities (Goods and Services) Act 1970, which enables them to trade with public bodies. Such trade is restricted to those persons who have been designated as public bodies by the Secretary of State through an Order.

The Government stated in its White Papers that it "...will ensure that appropriate powers are available to provide services to others." There are a number of issues that need to be settled in this regard. We need to identify the circumstances where it is justifiable for local authorities to provide services to others. We need to determine where the limits to such activity should be and consider other safeguards to the taxpayer, for example, on the level of risk or volume of such activity. We also need to ensure that such activity is consistent with fair competition.

Authorities have expertise in certain areas, often developed primarily for in-house use—for example, legal services. In a partnership context other parties often wish to make use of this expertise. Where the other party is a public body existing legislation can cope, although there may be a need for a designation order under the 1970 Act. Where the private sector is involved it is more problematic. Sometimes, a way can be found to designate the other party as a public body (or body exercising functions of a public nature). It would seem preferable to formulate a more rational basis both to restrict and permit local authorities' ability to provide goods and services to partners and others involved in helping to secure best value for the community.

In the short term, it would be helpful to streamline the operation of the 1970 Act to designate categories of organisations rather than specific individual organisations as public bodies on a case-by case basis. This would simplify what is presently a time-consuming and expensive designation process. Broadly, the new categories would be limited to the sorts of organisations which have already been designated as public bodies. No orders under clauses 15-17 are needed to achieve this.

In the longer term, on the assumption that robust secondary legislation and statutory guidance can be put in place, we would wish to develop a legislative framework more appropriate to the best value and partnership context. For example, we may wish to enable local authorities to provide goods and services under best value to anyone on the basis of:

SMALL VOLUME AND VALUE GOODS AND SERVICES—FOR WHICH THERE IS A SOCIAL NEED—TO THE COMMUNITY WHICH IT CANNOT PROVIDE FOR ITSELF

For example, in a remote rural area with a dispersed elderly population where there is a demand for "handyman" services not being met by the market. There are clear social benefits in affordable provision of these services to vulnerable members of the community in terms of health, safety and crime prevention. Where no other ready supply can be found, or facilitated by a local authority, it may be appropriate for the local authority to "buy in" these services from its in-house, or out-sourced, provider of related services.

PROVIDING GOODS AND SERVICES AS A CONTRIBUTION TO A PARTNERSHIP.

Local authorities providing goods and services in an area of expertise to the private, voluntary sectors and/or other parts of the public sector where this is part of a wider partnership.

ENHANCING THE UTILISATION OF LOCAL AUTHORITY ASSETS.

In some cases the most efficient use of an existing asset may involve exploiting its commercial potential. Such activity has the ability to generate additional resources for core objectives, provide business opportunities to the private sector, and to benefit the economy as a whole through more productive use of assets. The Government's 'Wider Markets' policy was formally announced in November 1998. The Wider Markets document does not extend to local authorities, although many of its considerations are relevant to them. The question of the local authorities' ability to make the most of their assets through the principles enunciated in Wider Markets will be assessed in tandem with the broader asset management regime as proposed in the White Paper.

There are clearly potential benefits from local authorities providing goods and services to others but equally there are risks. It will be important to build a consensus around balancing the need of local authorities and their partners for flexibility and efficiency with minimising risks.

Safeguards

The best value framework itself provides powerful safeguards over the way in which best value bodies would exercise their functions using any new or modified powers. A number of the key elements of the framework are very relevant here: fundamental performance reviews, local performance plans, the audit and inspection framework, the accounting framework and intervention powers.

The fundamental performance review will be the primary vehicle for best value authorities to determine the option most appropriate to them—in terms of targets for economy, efficiency and effectiveness and taking account of local needs. The review will be a new discipline through which best value authorities must challenge what they do and the way in which they do it. It is clearly desirable for local authorities to have as much scope as possible to do things better and in different ways—for example, in partnership with others. The guidance governing the conduct of the fundamental performance reviews can be tailored to ensure that they make best use of any new options made available to them under clauses 15-17. In the case of providing goods and services, a specific form of business case could be required to ensure that it was justified in each case. Specific accounting arrangements could be required to ensure transparency—for example, to ensure that there is no cross-subsidisation of trading activities. The new external audit and inspection regime will ensure compliance with these requirements with intervention powers available in cases of failure.

The wider existing regulatory framework for local authorities and other best value authorities already contains many features that will continue to act as safeguards. For example, expenditure incurred by an authority in setting up and running partnerships will need to be met from the revenue budget each year. Similarly, local authorities capital expenditure will be still subject to the present legislative framework.

In addition to these controls inherent in the best value framework, clauses 15-17 allow for new powers to be subject to any conditions or limitations which the Secretary of State judges necessary. For example, in the case of trading, we might want to consider a threshold which would limit best value authorities trading activity.

Next Steps

Ultimately, local authorities' new and amended powers will make a significant impact in enabling them to achieve best value in providing services to their local communities. Ideally, all these changes should be in place and available from the start of the best value framework in April 2000. However, there are differing levels of technical development in the legislative details, there is not a full consensus on what needs to be done nor on the best way of delivering it. It is for these reasons that we consider the use of secondary legislation to be more effective. In that way, we can adopt a step by step approach in the development of understanding of problems, the development of secondary legislation to resolve the problems and its implementation. Consequently, before formal consultation on firm legislative proposals, we have started to undertake informal bilateral meetings with interested parties in order to build up a consensus on these issues and establish the priorities which face local government for the introduction of the best value framework.

POSSIBLE USES FOR CLAUSE 17

The purpose of Clause 17 is to ensure that best value authorities, not only local authorities have access to the provisions of section 70 of the Deregulation and Contracting Out Act 1994. These provisions provide the Secretary of State with order-making powers to allow local authorities to contract-out statutory functions. The Government said in the Green Paper Modernising local Government, improving local services through best value that it would consider enabling them to do so if this were thought to be helpful in achieving best value and if appropriate safeguards to ensure propriety and fairness could be ensured by other means.

Clearly any use of these powers by best value bodies would need to considered in context. However, examples are given below for illustrative purposes of the way in which the section 70 power has been used by local authorities:

THE LOCAL AUTHORITIES (CONTRACTING OUT OF TAX BILLING, COLLECTION AND ENFORCEMENT FUNCTION) ORDER 1996

This enables local authorities to authorise others to exercise their functions in relation to the administration and enforcement of the council tax, community charges and non-domestic rates.

THE LOCAL AUTHORITIES (CONTRACTING OUT OF ALLOCATION OF HOUSING AND HOMELESSNESS FUNCTIONS) ORDER 1996

This enables local housing authorities in England and Wales to authorise others exercise certain of the authority's functions relating to the allocation of housing accommodation and to homelessness.

THE CONTRACTING OUT (FUNCTIONS IN RELATION TO THE PROVISION OF GUARDIANS AD LITEM AND REPORTING OFFICERS PANELS) ORDER 1996

This enabled local authorities in England and Wales to authorise others to exercise their functions in respect of panels of guardians ad litem and reporting officers. This was in relation to children's care issues.


 
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