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 1517
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
- 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
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 arrangementsfrom the public
or private sectorscan 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
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 usefor 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 SERVICESFOR
WHICH THERE IS A SOCIAL NEEDTO 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
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
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.
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 themin 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 waysfor
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 transparencyfor
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
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
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)
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.