Sections 16-20: Exercise of functions by best value authorities

48. Section 16 creates ancillary powers for best value authorities to act in pursuance of best value. It does so:

• by creating, at subsection 16(1), a power in similar terms to the current provisions of section 1 of the Deregulation and Contracting Out Act 1994, which allows the Secretary of State to modify or exclude the application of enactments which apply to best value authorities. He may do so only if he is satisfied that such an action would either modify or exclude the application of a provision which restricts a best value authority's ability to achieve its statutory duties under best value, or would serve to facilitate the achievement of them. Such a power could be used, for example, to exclude the application of existing statutory provisions which require best value authorities to divest themselves of certain functions;

• by creating, at subsection 16(2), a power which allows the Secretary of State to confer upon best value authorities a power to do anything which is designed to facilitate the achievement of best value. Such a power would be subject to any conditions or limitations which the Secretary of State judges necessary. A practical example of how this might be used is to confer on best value authorities a general power to form companies through which to exercise their functions, which goes beyond their current powers to form companies only for specific purposes. Such a power might be subject to limits and safeguards imposed by the Secretary of State, and in exercising it, best value authorities would be required to have regard to any guidance issued by the Secretary of State.

49. This power will not be exercised by the National Assembly for Wales. However, the relevant Secretary of State will need to consult the Assembly before exercising this power in respect of Wales.

50. Section 17 describes the procedure the Secretary of State shall follow in making an order under subsections 16(1) and (2). He is required to consult such authorities or persons as appear to him to be representative of interests affected by his proposals, and to lay before each House of Parliament a document explaining his proposals. Section 16 already sets out that orders made under subsections 16(1) and (2) are subject to the affirmative resolution procedure in both Houses.

51. Section 18 provides a power in similar terms to that under section 70 of the Deregulation and Contracting Out Act 1994, which enables the Secretary of State to provide by order for best value authorities to contract out functions (subject to certain restrictions similar in terms to those under section 71 of the 1994 Act). An example of an order which might be made under this provision would be one which, for example, allowed relevant best value authorities to contract out housing benefits determination work. The procedure under and circumstances in which this power can be used are set out at subsection 18(2). This power cannot be exercised by the National Assembly for Wales.

52. Regarding good procurement practice, paragraph 7.26 of the English White Paper (7.35 in Wales) says that the Government will look for an early legislative opportunity to amend the list of factors which authorities can take into account in inviting tenders and awarding contracts, consistent with European obligations and with the principle of the achievement of value for money. Section 19 therefore provides for the Secretary of State to specify by order, in relation to best value authorities, matters which will cease to be "non-commercial matters" for the purposes of section 17 of the Local Government Act 1988. (The 1988 Act already provides for the Secretary of State to specify additional non-commercial matters.) This provision might be used to enable best value authorities to have regard to certain work force matters in the contractual process.

53. Where a matter ceases, by virtue of an order under section 19, to be a non-commercial one, then in the future exercise of the function concerned, best value authorities will be required to have regard to any guidance issued by the Secretary of State.

54. Section 20 of the Act extends the application of section 2(1) of the Local Government, Planning and Land Act 1980 to cover all best value authorities. As presently drafted, it applies to only some of them and does not, for instance, capture the Greater London Authority or any of its constituent bodies. This section of the 1980 Act provides the Secretary of State with a power to issue a Code of recommended practice as to the publication of information by relevant authorities regarding how they discharge their functions. It should be read in conjunction with section 23 (see paragraphs 58 & 59 below), which is concerned with the preparation, keeping and certification of accounts.

Sections 21-29: General provisions

55. Section 21 repeals the legislation requiring some best value authorities to subject certain functions to CCT, this repeal taking effect from 2 January 2000. It also provides powers for the Secretary of State to issue guidance to best value authorities with regard to the interim period between 2 January 2000 and the date when the general duty of best value will be applied. This guidance will cover the way in which they exercise their functions and might include, for example, a consideration of how procurement and contractual arrangements should be approached in the light of the imminent application of the duty of best value.

56. Section 22 makes amendments to certain provisions in Parts III and IV of the Audit Commission Act 1998, in the light of the Commission's new functions under best value. It widens the application of section 33 of the 1998 Act by amending it to refer to the exercise of local authority functions, rather than merely the provision of local authority services. It also amends the provisions at section 49 of that Act to allow the Commission to disclose information relating to best value authorities for the purposes of discharging its functions in relation to best value as provided for by the Local Government Act 1999, particularly with regard to best value inspections as set out for sections 10-13 above.

57. Section 22 also makes provision for the Housing Corporation in England (in Wales the functions are exercised by the Secretary of State, and in due course the National Assembly) to provide advice and assistance to the Audit Commission in relation to the exercise of the Commission's best value functions, where the Audit Commission requests it. It also makes provision for the Corporation to be paid by the Commission for any such advice or assistance it provides.

58. Section 23 provides the Secretary of State with a power to create a statutory accounting framework which will apply to best value authorities. In doing so, it closely, though not exactly, follows the model laid out at section 27 of the Audit Commission Act 1998. Section 23 provides the Secretary of State with powers

• to regulate how best value authorities prepare, keep and certify accounts;

• to specify how accounts should be deposited, published and made available for public inspection.

59. It complements the rather wider powers relating to publication of information contained in section 20. Before using section 23 powers, the Secretary of State is obliged to consult with the Audit Commission, best value authorities or persons appearing to him to represent them, and such bodies of accountants as he deems appropriate.

60. Section 24 makes changes to the Police Act 1996 which are designed to strengthen collaboration between police forces and police authorities, and place the rôle of Her Majesty's Inspectorate of Constabulary (HMIC) in best value on a clear statutory footing. Subsection 24(1) adds to the provisions at section 8(2) of the 1996 Act a specific requirement that Chief Constables, in preparing the first draft of a police authority's local policing plan, shall include particulars of any action proposed for the purpose of complying with the police authority's duty to achieve best value.

61. Subsections 24(2) and 24(3) extend HMIC's powers of inspection for the purposes of best value by amending section 54 and 55 of the Police Act 1996. Section 54 of the 1996 Act, in its current form, provides HMIC with a power to inspect police forces only. Police forces are not best value authorities, whereas police authorities are. Section 24 therefore provides that HMIC may inspect police authorities, but this power of inspection extends only to a consideration of the extent to which police authorities are complying with the duty of best value.

62. The Government made it clear in its Local Government White Papers that it would ensure that different inspectorates worked together to develop a consistent approach to best value inspections. Paragraph 7.44 of the English White Paper (7.58 in Wales) stated that the Government "will take a power to enable the Secretary of State to make such arrangements as necessary in consultation with the inspectorates to ensure the smooth and efficient operation of the inspection process".

63. Section 25 provides that the persons and bodies it describes are, when arranging and carrying out best value inspections, to have regard to any guidance which the Secretary of State issues for the purposes of securing their co-ordination. The bodies in question include the Audit Commission, inspectors of fire brigades and constabulary, the Chief Inspectors of Schools in England and Wales, and inspectors appointed under the Local Authority Social Services Act 1970, National Health Service and Community Care Act 1990, Children Act 1989 and Social Security Administration Act 1992 respectively. Section 25 also provides the Secretary of State with a power to amend this list of persons and bodies in future.

64. Section 26 provides the Secretary of State with a general power of guidance in respect of all the provisions in Part I of the Act. It allows the Secretary of State, in issuing guidance to best value authorities about the manner in which they comply with best value, to issue both general guidance, capable of widespread application, as well as guidance aimed specifically at one or more authorities (which could, for instance, be targeted at bodies with a particular range of functions, such as the GLA).

65. It also allows the Secretary of State to issue different guidance to different authorities, thus allowing flexibility, for instance, to issue guidance aimed at police authorities which differed in some respects from that issued to local authorities generally. Section 26 also provides that the Secretary of State, before issuing any relevant statutory guidance, must consult the authorities concerned or those persons who appear to him to represent them.

66. This general guidance power is designed to complement the more specific powers of guidance which are set out elsewhere in Part I, e.g. in respect of the setting of performance targets and the conduct of best value reviews. The possible issues which it might be used to address will include, for instance, how best value authorities tackle cross-cutting issues such as social exclusion, equality and sustainable development.

67. Section 27 makes arrangements for the commencement of the provisions in Part I of the Act. As a general rule, the Act provides that provisions will commence automatically 12 months after Royal Assent, unless either the Secretary of State or National Assembly for Wales choose to commence them earlier. However, not all provisions in the Act are exercisable by the National Assembly, so section 27 provides specifically that:

• the Secretary of State may make provision for early commencement in Wales in respect of the best value authorities mentioned at subparagraphs 1(1)(d) and subparagraphs 1(1)(e) (i.e. police and fire authorities). The locus to act in respect of these bodies is reserved to the Secretary of State (in this case to the Home Secretary), rather than the National Assembly;

• the Secretary of State may provide for sections 14, 16 to 18 and 24 to be brought into force earlier than the automatic commencement date. Again, the powers set out in these clauses are reserved to the relevant Secretary of State, and not exercisable by the National Assembly.

68. Section 29 provides that, in relation to the application of Part I to Wales, the Parliamentary procedures in that Part are to be omitted, and references to the National Assembly for Wales are to be substituted for references to the Secretary of State. These changes do not apply in relation to police and fire authorities. Nor do they apply in relation to the Secretary of State powers in sections 14 (inspections of housing benefit and council tax benefit), 16 and 17 (powers to modify enactments and confer new powers), 18 (contracting out of best value authority functions), 24 (amendments to the Police Act 1996) and 27 (commencement).

PART II: COUNCIL TAX REGULATION

Section 30 and Schedule 1: Regulation of council tax and precepts

69. Section 30 of the Act inserts a new Chapter IVA into Part I of the Local Government Finance Act 1992, and provides for the new chapter to have effect from 1 April 2000. References to sections in what follows are references to the proposed new sections of the 1992 Act.

70. Section 52A defines the authorities which will be affected by this Chapter.

71. Section 52B gives the Secretary of State the power to take action against an authority (under section 52D) if he decides that its budget requirement for the year under consideration is excessive. The Secretary of State must determine a set of principles that will be used to decide if the budget requirement is excessive and this set of principles must contain a comparison of the budget requirement for the year under consideration with that of an earlier year. The Secretary of State may also determine categories of authorities and any principles applied to authorities must be the same for all authorities within the category. If the Secretary of State does not determine categories, the same set of principles must be used for all authorities.

72. Section 52C provides that the Secretary of State may set a notional amount for the budget requirement for an authority. It may be used to set a notional amount for an authority where there has been a change in function or boundary so that a valid comparison can be made with the budget requirement for the year under consideration. It may also be used to set a notional amount where there was no budget requirement set for an earlier year.

73. Section 52D enables the Secretary of State, if he decides that the budget requirement is excessive, to designate or nominate the authority.

74. Section 52E sets out the procedure that is followed if the Secretary of State designates an authority under section 52D. This is 'in year' designation and the procedure would normally start as soon as possible after the beginning of the financial year, in April or May.

75. The Secretary of State must notify the authority that it has been designated and inform it of the set of principles used to decide that its budget requirement was excessive and the category into which the authority falls. He will also state the amount which he proposes should be the maximum amount for the budget requirement for the year and the target amount for the budget requirement. The target amount is the maximum amount which the Secretary of State considers should be the budget requirement for the authority without it being excessive. In most cases it is expected that the maximum set for the year will be the same as the target amount. However, where the Secretary of State considers that the local authority should reduce its budget requirement over several years to reach the target, he may set a different maximum for the year. The Secretary of State will also inform the authority when he expects it to reach the target amount (uprated as necessary e.g. because of inflation). The local authority then has 21 days to accept the maximum amount or challenge it and put forward an alternative.

76. Section 52F sets out the procedure if the local authority challenges the maximum amount. After the Secretary of State has considered any information put forward by the local authority he will inform the local authority of the amount which will be the maximum for its budget requirement of the year. The amount decided by the Secretary of State as the maximum for the year may not exceed an amount already calculated by the local authority, but may be greater or smaller or the same as that already notified by the Secretary of State under section 52E. He may also alter the target amount for the year. This may be necessary if he alters the maximum amount as future year designation is triggered if the budget requirement is above the target.

77. The maximum amount will be set out in an order which must be approved by resolution of the House of Commons. The local authority is then informed of the maximum amount in a notice.

78. Section 52G provides for the procedure if a local authority accepts the maximum amount. The Secretary of State simply sends the local authority a notice confirming the maximum amount.

79. Section 52H provides for what happens if the local authority does not challenge the maximum amount or accept it. The maximum amount will be set out in an order which must be approved by resolution of the House of Commons. The local authority is then informed of the maximum amount in a notice.

80. Section 52I provides for what a billing authority must do if it receives a notice informing it of the maximum amount. It must make substitute calculations so that its budget requirement is at or below the maximum amount.

81. Section 52J provides for what a precepting authority must do if it receives a notice informing it of the maximum amount. It must recalculate its budget requirement so that it is at or below the maximum amount.

82. Section 52K sets out the procedure that applies if an authority which has received a notice setting out the maximum amount fails to recalculate its budget requirement within 21 days, or 35 days in the case of the Greater London Authority. If it is a billing authority, it cannot transfer any resources from its collection fund to the general fund. Thus it cannot make use of any council tax collected. In the case of a precepting authority, the authority which collects council tax on its behalf has no power to transfer this money to it. These restrictions apply until the local authority has recalculated its budget requirement.

83. Section 52L provides for what happens if an authority is nominated rather than designated under section 52D. The Secretary of State informs the local authority that it has been nominated, the set of principles used to decide that its budget requirement was excessive and the category into which the authority falls. He also informs the local authority of the target amount for the budget requirement. It is expected that local authorities that are nominated would be informed of the nomination early in the financial year, around May or June.

84. Once a local authority has been nominated, the Secretary of State will decide whether to proceed under section 52M or under section 52N.

85. Section 52M sets out the procedure for an authority that is designated after being nominated. This is 'following year' designation and affects the year after the year under consideration. Generally it is expected that the local authority will be nominated at around the same time as in-year designation takes place, i.e. around May or June. However, designation for the following year will not take place until around the time of the announcement of the provisional finance settlement i.e. November/December.

86. The Secretary of State will notify the authority of the designation, the amount which he proposes should be the maximum amount for the budget requirement for the following year, the target amount for the budget requirement for that year (which may be the same as the maximum amount) and when he expects the authority's budget requirement not to be excessive.

87. The Secretary of State will also inform the authority how long they have to challenge or accept the maximum amount. It is expected that the period will be timed to coincide with the end of the consultation period for the provisional local government financial settlement.

88. The authority may challenge the maximum amount and put forward an alternative or it may accept it.

89. Section 52N provides for the procedure if an authority is nominated by the Secretary of State but is not designated. Instead, the Secretary of State will determine an amount which will be taken as the notional budget requirement for the year under consideration. This notional amount will be used in any future years when making comparisons to decide whether or not the budget requirement in future years is excessive. The local authority will have 21 days in which to challenge this amount. At the end of the 21 days the Secretary of State will determine the notional amount (taking into account any challenge by the local authority) and notify the local authority. It would be expected that this would take place shortly after nomination, around June or July.

90. Section 52P sets out the procedure that will be followed if an authority is designated after it has been designated in a previous year. If an authority has been designated for a year, a maximum amount and a target amount will have been set. If the budget requirement set by the authority for the year is higher than the target amount, then this section operates and the local authority will be designated for the following year.

91. This procedure is the same as that described for section 52M because, as in that section, the authority is being designated for the following year. And again it is expected that this procedure will start at around the same time as the provisional local government finance settlement is announced, in November or December.

92. Sections 52Q, 52R, 52S, 52T, 52U, and 52V set out the procedures that will be followed once an authority has been designated for the following year. The procedures are very similar to those described for in-year designation. These sections set out what happens if the local authority challenges the maximum amount, accepts the maximum amount, or does not challenge or accept the maximum amount. They also provide that an authority must make substitute calculations once it receives a notice of the maximum amount and set out what happens if they fail to make substitute calculations.

93. Section 52W provides that the budget requirement should be calculated according to definitions set out in the Local Government Finance Act 1992 and the Greater London Authority Bill (when enacted).

94. Section 52X provides that, for the purposes of this Chapter, the budget requirement of a billing authority should be net of local precepts, as should the target amount and maximum amount set by the Secretary of State. However, the Secretary of State may, by order, provide that local precepts be included.

95. The Local Government Finance Act 1992 provides that billing authorities must set their budget requirement by 11 March and major precepting authorities must do so by 1 March. Section 52Y requires local authorities to provide the Secretary of State with their budget requirement seven days after it has been set. This information is needed by the Secretary of State to decide whether or not the budget requirement is excessive. The billing authority must also inform the Secretary of State of any local precepts, as the Secretary of State needs to know what these are to work out the net budget requirement.

96. Capping powers in Wales under the 1992 Act are currently exercised by the Secretary of State for Wales. The Act provides that the National Assembly for Wales will exercise the new reserve powers to limit local authority expenditure in Wales. Section 52Z does three things to that end:

• subsection 52Z(1) provides for the new Chapter IVA of the 1992 Act to apply separately in Wales and England. Section 63(1) of the 1992 Act has a similar effect at the moment;

• subsection 52Z(2) makes various modifications to Chapter IVA for Wales. They are explained in more detail below;

• subsection 52Z(3) provides for any order made by the National Assembly for Wales under Chapter IVA to be in the form of a statutory instrument. The Assembly procedures for such instruments are set out in sections 64 to 68 of the Government of Wales Act 1998 and in its standing orders.

97. The modifications made by subsection 52Z(2) are:

• substituting the National Assembly for Wales for each reference to the Secretary of State (subparagraph 52Z(2)(a)). This ensures that the new reserve powers in Wales are exercised by the Assembly;

• removing references to Parliamentary procedures (subparagraph 52Z(2)(b) and most of subparagraph 52Z(2)(c)). The Government of Wales Act 1998 provides that, for functions transferred to the Assembly, Parliamentary procedures for reports, orders etc will generally cease to apply. The modifications ensure that Parliamentary procedures will not apply to the Assembly's exercise of the reserve powers;

• changes flowing from the existence in Wales of a council fund instead of separate general and collection funds (the modifications relating to subsections 52K(2) and 52V(3) in subparagraph 52Z(2)(c), and subparagraph 52Z(2)(d)). Section 38 of the Local Government (Wales) Act 1994 requires each county and county borough council in Wales to establish and maintain a council fund.

98. Section 31 provides that if the budget requirement of a major precepting authority is excessive, that authority shall make payments to the billing authorities to which it issues a precept. Excessiveness is to be determined by criteria specified by the Secretary of State. These criteria may be based on such factors as the Secretary of State sees fit, which can be different from the factors used to decide if the budget requirement is excessive for the purpose of Chapter IVA. The calculation of the payment shall be in accordance with regulations which will also require the precepting authority to provide information to the billing authority. This section applies for the financial year beginning on 1 April 1999 and subsequent years and comes into force on Royal Assent. In the year beginning on 1 April 1999, excessiveness shall be determined by the Secretary of State (and not in accordance with specified criteria). In Wales the powers of the Secretary of State shall be exercised by the National Assembly for Wales.

PART III: GENERAL

Section 33: Finance

99. Section 33 makes provision for certain expenditure which arises as a result of the introduction of the Act to be met by monies provided by Parliament. The expenditure concerned includes expenses incurred by the Secretary of State under the Act; increases in expenditure under other enactments which are attributable to the provisions of the Act, and expenditure incurred by the Audit Commission in discharging its functions under the Act, which is to be met in part by grant.

100. In the case of the Audit Commission, section 33 makes specific provision for the National Assembly for Wales to also make grants to the Audit Commission in respect of expenditure it incurs under the Act.

COMMENCEMENT

101. Sections 1 to 20 and 22-26 of Part I of the Act will commence 12 months after Royal Assent unless an order is made to commence these provisions earlier. An order is very likely to be made in respect of a number of specific provisions (which confer an order-making power on the Secretary of State, or which allow him or the Audit Commission to issue guidance or Codes of Practice to authorities and auditors) to provide for commencement as soon as possible after Royal Assent. The provisions in question are:

• section 1: defining best value authorities

• subsections 2(1), 2(2), 2(3), 2(5) and 2(6): extending or disapplying the duty

• subsections 3(2), 3(3) and 3(4): consultation

• subsections 4(1), 4(2), 4(3), 4(4): specifying performance indicators and standards

• subsections 5(2), 5(4), 5(5), 5(6) and 5(7): orders and guidance regarding best value reviews

• section 6: orders and guidance regarding best value performance plans

• subsections 8(2) to 8(7): codes of practice and scales of fees relating to best value audit

• subsection 10(4): guidance on inspections

• subsections 12(1) and 12(4): scales of fees relating to best value inspection

• subsections 15(7) and 15(8): Secretary of State's powers: regulations

• section 16: powers to modify enactments and confer new powers

• section 17: procedures for clause 16 orders

• section 18: contracting out of functions

• section 19: orders and guidance regarding non-commercial considerations

• section 22: Audit Commission

• section 23: accounts

• subsection 24(1): Police Act 1996

• section 25: co-ordination of inspections

• section 26: general guidance