LGiU Second Reading briefing on the Decentralisation and Localism and Bill 2010 Overview Localism is a main theme

of current government policy, and the Localism Bill is presented as the main vehicle for measures that will strengthen the capacity of communities and individuals to find local solutions to local problems. The pursuit of localism, seen from LGiU’s perspective, takes the form of strengthening local democracy by putting citizens in control of their own lives, communities and local services, and achieving this by shifting the balance of power from Whitehall to localities. From this perspective, the key question will be, Will the Localism Bill improve the ability of local people to make decisions about local services and public spending priorities, and will it engage them as citizens within a framework sustained by a strong, responsive council? LGiU welcomes the Government’s commitment to localism and would like to see the Bill affirm the role of councils, whilst limiting the current Bill’s centralising powers. For example in the determination of the principles on which council tax is calculated annually by the Secretary of State, and implicitly, in the creation of an unprecedented ability for the Secretary of State to introduce significant measures through secondary regulation. This briefing deals with the key elements of the Bill which will have an impact on Localism. Other important elements, on council constitutions and elected mayors, housing, council tax, and London, may be the subject of separate briefings. Overview An overview of the localism elements of the Bill shows that: 1. The General Power of Competence, while providing a degree of relaxation of constraint on councils’ powers, could be strengthened. 2. The involvement of local people through referendums on general issues are likely to be used rarely, and are introduced in parallel to the unfortunate repeal of rights to petition which provide a straightforward way for most issues of local concern to be raised in a flexible and immediate way.

3. Referendums on council tax will provide a highly structured mechanism for the Secretary of State to determine the level of council tax. 4. The Community Right to Challenge could be an excellent opportunity for charities and not-for-profit organisations, and groups of council staff to bid to provide council services, however the role of the local authority as an arbiter between rival bids, and as a guarantor against service failure will need to be more closely examined. 5. Arrangements for parish councils to nominate buildings and assets of community value may be extended to community organisations, but will not prevent the intervention of Ministers in what the Bill seeks to characterise as local decisions. 6. The revision of the local planning regime to allow local people to be involved in planning their areas consists of a highly cumbersome and resource-intensive scheme of inspections and referendums which is ultimately likely to be funded by developers, with councils also bearing significant costs.

Powers and status of local government: General Power of Competence – clauses 1-7 The Bill provides a power for councils in England to do anything lawful, and in this it is broader than the well-being power. It makes clear that councils will be able to make decisions that involve activities anywhere in the UK or abroad, to do so for a charge or for a commercial purpose, and whether the activity benefits the authority or local people, or, it appears, others benefit, for example through the external provision of services to other organisations. The well-being power is repealed as far as England is concerned: it will continue to apply in Wales. There are some powerful caveats. Decisions using the general power will be subject to the express limitations on what councils can do in existing legislation - though this may overcome one problem associated with the well-being power by narrowing the scope of the restrictions that apply – and it will be possible to exclude use of the general power in particular fields in future legislation too. The limitations on charging and providing services on a commercial basis are similarly based on the current law, so that it won’t be possible to charge a commercial rate for services provided using the new power, unless this is done through a company. Nor should it be forgotten that activities using the new power will be subject to the general law, including competition law, and that decisions will be governed by the tests, such as reasonableness, that apply to all local authority decisions. The Secretary of State reserves some important powers: to make orders preventing specific activities using the power – a parallel with the well-being power – and –

what is new - to introduce orders making use of the general power subject to conditions, whether generally, or in relation to specific activities. It will be important for Ministers to make clear at Committee Stage whether it is intended to rely on this second provision to introduce a framework for use of the general power, or whether this is to be a reserve power to be used should serious problems arise in particular instances. Ommissions There are some important omissions in what LGiU and others believe should be included with the introduction of a general power. Firstly, the power has been made subject to existing law: any changes will only come about as a result of successful applications to the Secretary of State on specific topics. LGiU would want to see a general review of existing law, removing provisions that conflicted with the general power, in this way dealing with problem areas in advance rather than leaving councils to find themselves in difficulty. Secondly, the power is being introduced into a highly centralised local government environment, in which a broad statement of the role and purpose of local government would make a profound difference to the way in which the courts interpret the law, in which civil servants across Whitehall deal with local issues, and in the confidence that local representatives bring to their tasks. Such a statement, by making parliament’s intention clear, would mean that the courts had to take account of the broad purpose underlying the new law when reviewing cases brought against local authorities, and avoid the narrow interpretations that still emerge when judges are given the chance to determine the responsibilities of local government. Comment The proposals for a broad general power will be welcomed by most in local government, and it is to the credit of the government that they have tackled the need for councils to have greater confidence in their general powers, in contrast to the ‘sticking plaster’ approach to solving problems as they arose, followed to date. Substantial promises were made, and it is clear that the power does not provide that promised in the Conservative pre-election documents and ministerial statements, that no action except raising taxes will be beyond the powers of local government in England. Although the general power is broadly expressed, much will depend on the way in which it is interpreted by the courts – and how lawyers anticipate it will be interpreted when they are advising councils on their decisions. It is important that the general power is underpinned by a broad statement, at a level which protects the ability of locally elected representatives to make

democratic decisions and to represent and support the participation of people locally. This Bill is an opportunity to nail down the constitutional status of local government, which has been subject to the widely varying views on the role and responsibilities of local government on the part of central government over the last fifty years. The lack of a statement that recognises the differing spheres of influence of central and local government allows Ministers central government to cherry pick those issues which are local and those which are not. The issue of weekly or fortnightly bin collections is one recent example. Council officers and councillors will want to know whether they can make the new power work for their council and the communities they represent. They will want to be reassured about their ability to tackle key issues such as worklessness, economic growth and climate change, and to know that they will be able to work confidently in an increasingly pressured political and economic environment, to respond to local priorities and to play a full role in local partnerships. The general power should be one element of a broader framework which provides this working environment. A greater say? Local Referendums on general issues: Clauses 39 – 55 Local authorities frequently fund referendums on issues of local importance without being under an obligation to do so. The Bill provides a formal structure, introducing a duty to hold a referendum at the conclusion of a process that can be triggered by a local petition, request from a councillor, or resolution of the authority. A local petition will qualify if it is signed by 5% of the electorate within a period of six months. The petition can be based on the whole area, a ward, or adjoining wards. Once a petition or request has been received, a referendum must be held unless the proposed question is likely to lead to a breach of the law, it is not on a local matter, or that in the case of a petition, that it is vexatious or abusive. The Secretary of State may specify subjects for referendums, and also set out topics that should not be treated as local matters. The referendum must be held within twelve months, and may be held on the same day as an election. Following the referendum, if it is on a subject over which it has an influence, the local authority is required to consider what steps if any it will take as a result. Where the subject is one over which a partner authority has an influence, it must be informed and will then be under a duty to consider what action it will take. The Bill allows the Secretary of State scope to introduce later regulations varying the scheme, by changing the percentage of the electorate required to sign a petition. The scheme could also be extended to parish councils. The Bill repeals the obligation to consider petitions introduced by the Local Democracy, Economic Development and Construction Act 2010 (which came into force in April 2010) and the duties to promote local democracy by publishing

information about the responsibilities of local bodies and their arrangements for public participation. Comment This provision is clearly intended as a means by which local people are able to raise a wide range of local issues: for example, in the early stages of the Bill a minister was quoted in the media as assuring the public that they would be able to have ‘a greater say’ on local bin collections as a result of the Bill. On such topics, however, the consultation and participation processes implemented as the ‘duty to involve’ are still in place, and ought to provide the basis for sounding and determining local views, and resolving priorities at an earlier stage. The views of community organisations and representatives on the value of this provision must be aired during the passage of the Bill, but it does appear that organising a petition, with a suitable question, will present a considerable challenge, and is likely to be used rarely. There must be regret at the repeal of the petitioning process, another means of expressing and resolving public concerns quickly and more flexibly (and with less commitment of public resources) than a referendum, although no doubt many councils will continue to promote petitioning schemes. Central control – Council Tax Referendums: clause 56 and Schedules 5 & 6 Local authorities will be required to hold a referendum if calculations based on principles determined annually by the Secretary of State result in a council tax for the financial year that is ‘excessive’. A parallel set of rules will apply to precepting authorities. The principles must be approved by parliament: the Secretary of State has the option of specifying an alternative amount. An authority that wishes to propose a council tax increase that exceeds that allowed by the principles set by the Secretary of State will be required to produce a substitute set of figures, which will apply if their main proposal is not approved in a referendum. It appears likely that authorities will put both their main calculation and substitute figures to referendum, although that is not specified in the Bill. If the authority fails to hold a referendum the substitute calculation will apply by default – an authority can in effect decide to forgo a referendum and adopt its substitute calculation. Local authorities will be required to conduct referendums on behalf of precepting authorities. The Bill contains detail about the timing of referendums, and also allows for those hopefully rare circumstances where compliance with a calculation based on the annual principles would result in an authority being unable to meet its financial obligations or to discharge its functions. Comment

In this case the referendum process is used inversely to enforce an amount of council tax based on principles set by central government. Councils must comply with central objectives or put them to the electorate in a referendum. The referendum process is used to create the appearance of local democracy, but the central mechanism is for the Secretary of State to set the amount of council tax, and to take this responsibility away from local representatives.

Opening public services to competition: Community Right to Challenge: Clauses 66 – 70 The Bill opens the way for voluntary and community organisations, not-for-profits, charities and social enterprises to trigger a procurement process by expressing an interest in providing or assisting in the provision of council services. It will also be possible for two or more local authority employees to put forward an expression of interest.

In reaching a decision, the council will consider the social, economic or environmental implications of the proposal. In the case of acceptance, the council will carry out a procurement exercise for the service - on a scale proportionate to the value and nature of the service - again taking account of its social, economic or environmental potential.

The scheme will apply to councils – in England only – although there is an indication that it could be extended more widely, with the possible extension of the scheme (through the use of regulations) to other organisations carrying out public responsibilities.

The possibility of fundamental change to the scheme is clear. At present the organisations able to express the right to challenge will have a status incorporating community and social ends, with an emphasis on application of reinvestment of any surplus. This could change, and without primary legislation. The Secretary of State will have the power through regulation to:

1. Use repeals and amendments to remove the organisations referred to in the Bill and to add others

2. Use repeals and amendments to remove or alter the provisions clarifying the voluntary, charitable and social objectives of applicants and add others, potentially of a commercial nature. 3. Use regulations to make amendments to every other aspect of this Chapter of the Bill, including making amendments to the regulatory powers it creates.

The Secretary of State also intends to ensure that he determines when a procurement process is triggered, and will use regulations to set out the grounds on which councils can reject an expression of interest, effectively limiting their discretion [clause 68(8)].

Other important issues to be within the power of the Secretary of State are; the scope of issues covered in an expression of interest, and what supporting evidence and documentation will be required [clause 66(1)(b)], and the services to which the scheme will apply, and what will be excluded [clause 66(4)].

Comment

The community right to challenge – to trigger a procurement process by expressing an interest in providing a particular council service – is a mechanism intended to “break open” what are characterised as public sector monopolies. As David Cameron’s speech heralded in October 2010, [We are] “Saying to people who work in our public services – set up a mutual, establish a cooperative, do things your way. Saying to a business, faith groups, charities, social enterprises – come in and provide a great service”. Hopeful voluntary organisations and cooperatives will find that the opportunity is more uncertain and complex than this statement suggests; the competitive process they trigger by expressing an interest may not be decided in their favour. The ‘right to challenge’ will not modify the procurement process, but it does influence procurement activity by creating a mechanism by which it can be triggered. It has the potential to impact upon the commissioning strategies and processes adopted by local authorities. The opportunity for external organisations presented by the right to challenge could be considerable, and it is one which the Secretary of State clearly intends will do more than encourage community-based service provision. In addition to providing for the introduction of regulations which will restrict the discretion of councils in

reaching decisions on expressions of interest (and so increase the likelihood that a procurement process will be triggered), the Bill creates a wide range of regulatory powers that could be used to completely rewrite the scheme which will be approved by Parliament. The use of regulations

The Bill makes startling use of what are known as Henry VIII clauses: provisions that allow a Minister to use regulations to create new laws which have the same force as Acts of Parliament but which don’t undergo the same rigorous process. The Lord Chief Justice, Lord Judge, has expressed his strong opposition to the increasing use of Henry VIII clauses. Disturbingly, there are eleven Henry VIII sub-clauses in the five main clauses that introduce the right to challenge.

It may be sensible to have the detail of how a scheme approved by parliament will work in practice introduced through regulations, quite another for a minister to effectively retain the power to redefine the scope of a statutory scheme, as here, without the primary legislation indicating what is likely to be involved. Retaining the power to completely alter the nature of a statutory provision through regulations after the Bill has been passed, as in this Bill, is something which would be of grave concern to the House of Lords Constitution Committee, should the committee have the opportunity to consider it. The effect of these clauses would be to create a Trojan horse, opening the way for future changes in the provision of public services without full Parliamentary debate.

Moratoriums on the sale of property: Assets of Community Value [clauses 71-82] Parish councils and some other organisations yet to be identified in regulations will be able to nominate local land or buildings to be included in lists maintained by local authorities. The effect of inclusion will be to require the owner of the property to notify the local authority when intending to dispose of it, so triggering a moratorium period during which community interest groups can apply to be treated as potential bidders. Whether a property is of community value, and which community interest groups may apply, will depend on whether it falls within a regulatory framework yet to be outlined. The Secretary of State will determine the terms of reference for these orders, and while councils will have some discretion, this will be within terms set in regulations.

The proposal involves considerable interference in private rights, which are protected to some degree by the owner of a listed property being able to request a review of the listing. A property will only remain on a list for five years, when presumably a further application would need to be made. Listing will be recorded on the Land Registry. The Bill makes provision for compensation to be paid to landowners – consistently with the framework of the Bill, when and by whom compensation is paid will be dealt with in regulations at a later date. Councils must list properties which comply with the regulatory framework, and will also need to maintain lists of properties where nominations have failed. They will be responsible for notifying owners and occupiers of listings, and of course for maintaining an accurate list in accordance with the five-year timetable. Comment The range and impact of this proposal is not clear, but it may have some value in ensuring that such issues are dealt with locally without direct ministerial intervention in particular instances.

The local environment - Planning and Neighbourhoods: Clauses 89-93, 96101 Local Development Framework The Bill retains the local development framework introduced under the last government. Local planning authorities (district and unitary councils) will continue to be responsible for Local Development Schemes and associated documentation, without the overview of regional strategies, but within a formal National Policy Framework. The local basis for planning will potentially be strengthened by putting those organisations with statutory responsibilities under a duty to cooperate with local planning authorities. This will require them to engage “constructively, actively and on an ongoing basis” in activities associated with the preparation of local development plans, with a focus on sustainable development. The Bill removes the requirement for authorities to submit their local development schemes to the Secretary of State, although the Secretary of State - or Mayor in the case of London – will still be able to intervene if needed to ensure effective coverage of the area by development plan documents. With some apparent freedom therefore, authorities will make their own decisions on their development schemes. However the revised system retains the requirement that the keys to implementing the scheme, the Development Plan Documents, must be submitted to the Secretary of State for independent examination and approval.

This will be a process of negotiation. The Bill tightens the process of approval: it must be shown that the documents comply with planning legislation and are sound – but every document that passes this test will be approved. Where there is a question about whether a document will be approved, an authority can ask the examiner to recommend changes to a document, and then accept those or submit a further draft. Although the process of approval is modified, the Secretary of State retains a veto and can direct that the documents can be withdrawn. And something is lost in the process: at present objectors can propose changes to a planning document and be given the opportunity to appear before the examiner; this is repealed by the Bill. The Bill introduces a further apparent decentralisation. Local planning authorities will no longer have to submit annual reports to the Secretary of State: they will be required to produce regular reports which comply with a set of regulations, and make these available to the public. Neighbourhood Planning This aspect of the Bill is hailed by the government as giving new rights to shape the local environment. There are two main aspects, neighbourhood development orders, and neighbourhood development plans. It will also be possible for a community organisation to apply for a community right to build order within this framework. Whether a particular neighbourhood order or plan is approved will depend on its being in general conformity with the strategic development plan for the area, complying with national planning policies and guidance issued by the Secretary of State, and complying with EU and human rights standards. An extensive framework of regulations will be introduced for the administration of the new scheme, and it will be necessary for neighbourhood organisations and planning authorities to comply with these. A neighbourhood development order will be made by a local planning authority on the application of a parish council or neighbourhood forum and will grant planning permission for a particular development or type of development. A neighbourhood development plan will set out policies for the development and use of land in the neighbourhood, and is similarly made on the application of a parish council or neighbourhood forum. In each case the authority, at the end of a lengthy process, must make an order if the result of a local referendum – of electors able to vote in council elections – shows that more than half those taking part support the proposal. A parish council has an identifiable representative role in an area. In addition to developing proposals and making applications, parish councils will be able to take

some responsibility for planning decisions within the neighbourhood framework if it is approved. Where there is no parish council, a local body can qualify for recognition as a neighbourhood forum with as few as three local residents as board members, and may be made up of people who live in, or want to live in the area. Obtaining a community right to build order will involve a further process, and a further local organisation. It appears possible that either a local authority or a parish council can grant planning permission – given that the main scheme allows for this – provided that the application is for a specified development on a specified site within the neighbourhood area. The Bill provides for applications to be made by community organisations which can show that more than half the members of the organisation live in the neighbourhood area at the time that the application is made. Community right to build orders follow the same procedures as the main neighbourhood development order, culminating in a referendum if the proposal is approved. [once again the process is highly regulated and a community organisation will have to comply with requirements set out in regulations] Comment The Bill implements aspects of the “Open Source Planning” approach set out in a pre-election Conservative Party Green Paper, which set out aims of reinvigorating construction and development industries, enabling local people to shape their surroundings in ways consistent with sustainability, and promoting participation and social engagement in the planning process. “Communities should be given the greatest possible opportunity to have their say and the greatest possible degree of local control”. The link to localism was made clear: “if we get this right, the planning system can play a major role in decentralising power and strengthening society”. The Green Paper asserted that “Only a radical reboot is going to deliver the planning system that we need to succeed in the years to come”. This system would be one where, rather than a centrally determined planning structure, “there is a basic national framework of planning priorities and policies, within which local people and their accountable local governments can produce their own distinctive local policies to create communities which are sustainable, attractive, and good to live in. Will the Bill be a radical measure? The mechanism has involved abolition of regional strategies and the introduction of modifications to the existing planning system. The resulting framework provides for local participation, but subject to limits. For communities, the primary opportunities are in the creation of neighbourhood development orders and plans. The making of either order will involve resources within the neighbourhood and for the planning authority.

Activities involved in obtaining an order or establishing a plan will require considerable capacity and resources at neighbourhood level. An application will involve preparing a written proposal supported by documentary evidence in compliance with a new regulatory framework, and making representations on the application. If successful, neighbourhood organisations will need the resources and capacity to take part when the application is examined by an independent examiner, who may decide that a public hearing is needed. No funding will be available, and there is the possibility that costs may be incurred. Finally, there will be the resources and costs involved in taking part in a referendum. It is probable that these demands will open the way for commercial developers to play a role in funding these exercises. There will be considerable costs to be borne by responsible local authorities. The planning authority will be responsible for the costs of providing initial advice and support to applicants; administering the application process and associated publicity; covering all the bases for considering the application, including consultation, provision of public information, considering representations; bearing the costs of an independent examination that is required, and bearing the costs of a referendum. Overall, it appears likely that these proposals will involve considerable challenges for community based organisations.

This briefing has been prepared by the LGiU for the Second Reading of the Decentralisation and Localism Bill. If you have any questions please contact Dan Garfield on 0207 554 2800. The LGiU will be providing further analysis across the Parliamentary passage of the Bill.

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