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Explanatory Notes to Local Government Act
1999 Chapter 27 |
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These notes refer to the Local Government Act 1999 LOCAL GOVERNMENT ACT 1999
EXPLANATORY NOTES
INTRODUCTION1. These explanatory notes relate to the Local Government Act which received Royal Assent on 27 July 1999. They have been prepared by the Department of the Environment, Transport and the Regions and the former Welsh Office in order to assist the reader in understanding the Act. They do not form part of the Act and have not been endorsed by Parliament.
2. These notes need to be read in conjunction with the Act. They are not, and are not meant to be, a comprehensive description of the Act. So where a section or part of a section does not seem to require any explanation or comment, none is given.
SUMMARY3. The purpose of Part I of the Act 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.
* Best value for these purposes is described as securing continuous improvement in the exercise of all functions undertaken by the authority, whether statutory or not, having regard to a combination of economy, efficiency and effectiveness.
Secondly, the Act 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 submit specified activities to Compulsory Competitive Tendering (CCT).
4. The purpose of Part II of the Act is to enable the Government to regulate increases in council tax. Firstly, the Act will 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, the Act will make provision for payments between tiers of authorities so that any shortfall in council tax benefit arising from excessive increases in council tax fall on the authority responsible.
BACKGROUNDBest value5. The Government published a provisional list of twelve Key Principles of Best Value in June 1997, which were later reproduced in both the English and Welsh Green Papers referred to below. 6. The Government built upon these Key Principles in its Green Paper Modernising Local Government: improving local services through best value, which was published in March 1998, and Modernising Local Government in Wales: improving local services through best value, published in April 1998. The latest statement of the Government's policy on best value was contained in Chapter 7 of the White Paper Modern Local Government: In Touch with the People and in chapter 7 of Local Voices: Modernising Local Government in Wales, which were both published in July 1998, setting out the Government's wider plans for the future of local government.
Council tax regulation
7. The Government set out its proposals for improving local financial accountability, including fulfilling its Manifesto commitment to abolish crude and universal capping, in its Green Paper Modernising Local Government: improving local financial accountability, which was published in March 1998, and Modernising Local Government in Wales: improving local accountability for council tax, published in April 1998. The latest statement of the Government's policy on improving local financial accountability was contained in Chapter 5 of the White Paper Modern Local Government: In Touch with the People and in Chapter 5 of Local Voices: Modernising Local Government in Wales as above.
OVERVIEW8. The provisions in Part I of the Act (best value) are divided into six main categories:
9. Part II of the Act consists of two sections giving effect to Schedule 1 on reserve powers to regulate council tax, and providing for payments from a major precepting authority to a billing authority.
10. The new reserve powers will allow the Secretary of State to look at an authority's changes in budget requirement over a number of years. It will also allow the Secretary of State to require a local authority to reduce its budget requirement over a number of years, and to require authorities to reduce their budget requirements below those of previous years or below their standard spending assessment. In addition, the Secretary of State will be able to exempt certain categories of authorities from budgetary controls, for example those with small budgets or those which provide only particular services. He will also be able to take into account factors such as the authorities' performance in delivery of best value, the support of local people for authorities' proposed budgets, and whether the council has beacon status, when deciding if the budget requirement is excessive.
11. The new reserve powers will operate as follows:
a) The Secretary of State will first have to decide if the budget requirement is excessive. He will be able to determine the set of principles he will use to decide whether or not the budget requirement set by a local authority is excessive. The set of principles must contain a comparison with the budget requirement of a previous year. He may also determine categories of authorities and use a different set of principles for each category.
b) If the Secretary of State decides that the budget requirement is excessive, he will be able to designate the authority for the year under consideration or for the following year. Where an authority is designated for a year, the Secretary of State will inform the authority of a target budget requirement and a maximum amount for that year. In some cases the target and maximum will be the same because the Secretary of State considers the local authority can reduce its budget requirement to target in a single year. However, if they are different the intention will be to designate the authority over a number of years until the target is reached. The Secretary of State will indicate how many years he considers it may take to reach the target (updated as necessary e.g. because of inflation).
c) An authority may be nominated by the Secretary of State instead of designated. In this case, he may set a notional budget requirement for the year under consideration. The notional budget requirement will be taken into account, instead of the actual budget requirement, if using that year to make a comparison when considering if future budget requirements are excessive.
d) The procedures for designation are similar to the current capping procedures. Where designation takes place in year the procedure is largely unchanged. Where designation takes place for the following year, again similar procedures are followed but the process will start at around the time of the announcement of the provisional Local Government Finance Settlement and be completed at the end of February and beginning of March.
12. In addition, the Act will contain provisions to require major precepting authorities to make payments to their billing authorities. Under the Council Tax Benefit Subsidy Limitation scheme, local authorities which make increases in council tax above a guideline set by the Secretary of State are required to make a contribution to the council tax benefit costs. Section 31 ensures that, where it is a major precepting authority which exceeds the guideline, it pays the contribution to its billing authorities since they are responsible for the administration of council tax benefit.
13. In Wales, the powers described above will largely be exercised by the National Assembly for Wales rather than by the Secretary of State.
COMMENTARY ON SECTIONS
PART I: BEST VALUESections 1 and 2: Best value authorities
14. Section 1 sets out those authorities which will be subject to the duty of best value ("best value authorities"). They include local and other authorities in England and Wales, as well as the soon-to-be-created Greater London Authority (subject to the passage of the Greater London Authority Bill which was introduced to Parliament in December 1998) and its main constituent elements. All of the authorities described in this section are within the scope of the local government finance system as billing, precepting or levying bodies.
15. Section 2 provides the Secretary of State with a power to extend the duty of best value to other named bodies within the local government finance system who are not included in section 1, and to modify the nature of the duty as it applies to them if it seems appropriate. It also provides the Secretary of State with a discretionary power to disapply, by order, best value duties in respect of specified functions of any best value authority or categories of authority where they would otherwise be subject to them. This power might, for instance, be used to exempt the smaller town and parish councils (community councils in Wales) from all best value duties where the costs of complying with those duties are considered to be excessive.
16. Section 2 makes further specific provisions in respect of the Greater London Authority (GLA), subject as above to the passage of the GLA Bill. Subsection 2(4) provides the Secretary of State with an order-making power which would allow him to extend the application of the duty of best value, as set out in section 1, in one of two ways, namely:
17. The former power could be used, for example, to apply the duty of best value to functions which are exercised through the GLA's Assembly, should the Secretary of State wish to do so. An example of the use of the latter power could be in respect of functions where the GLA, through the Mayor, carries out a strategic rôle in relation to an operational function of another body. This might, for instance, be the case where the Mayor undertakes a strategic rôle in respect of the transport function, where the operational rôle is carried out by Transport for London.
Sections 3-6 : Duties
18. Section 3 describes the general duty of best value. The duty is not described exhaustively, but requires best value authorities to make arrangements to secure continuous improvements in the exercise of their functions, judged against named criteria and with regard to a combination of economy, efficiency and effectiveness.
19. For the purposes of fulfilling the general duty, the section also imposes upon best value authorities a mandatory duty to consult with representative groups of people falling within specified categories, and in doing so, to have regard to any relevant guidance issued by the Secretary of State.
20. Section 4 provides for the creation of the performance measurement framework which will be applicable in respect of the duty of best value. It provides the Secretary of State with a discretionary power to prescribe by order factors of performance (performance indicators) against which best value authorities will be measured. In addition, the Secretary of State may set national standards in respect of any such performance indicators which he prescribes, and where he does so, best value authorities must meet the relevant standard in order to satisfactorily discharge the duty of best value. Section 4 also gives the Secretary of State discretion to specify different performance indicators and standards.
21. As a matter of general principle section 4 also provides that, in setting indicators and standards, and in deciding to do so, the Secretary of State must have regard to the general nature of the duty of best value described within section 3, and also to any relevant recommendations which the Audit Commission make to him in respect of performance measurement. In addition, before specifying performance indicators and standards, the Secretary of State will be obliged to consult with persons appearing to him to represent best value authorities and such other persons as he sees fit. The Audit Commission, which has responsibility (under section 44 of the Audit Commission Act 1998) for the prescribing of performance indicators, is expected to continue to analyse performance data under best value and make recommendations based upon its findings to the Secretary of State as to how the indicators and standards might be amended or adjusted in the future.
22. Section 5 is concerned with the manner in which best value authorities conduct reviews of their functions, reviews being one of the key procedural components of best value.
* Review is used here in the sense of requiring best value authorities to carry out an initial assessment of whether functions are to be performed, how, by whom and to what standard.
Thus an authority which was considering how education might be provided to excluded children would begin, initially, by considering whether it ought to provide the service at all. In this case, there are certain statutory standards that the authority needs to observe in terms of the minimum level of education provided, and its further consideration under the review might result in the authority only providing the statutory minimum level of education, or something higher; and giving an indication of how the function is to be performed-e.g. by home visits or through education centres.
23. The section provides that best value authorities must review all of their functions within a time period which is specified by the Secretary of State. The Government expects that, initially, this period will be set at five years. In conducting reviews authorities must also have due regard to the general nature of the duty as described within section 3, and to any relevant guidance issued by the Secretary of State. The section also describes a number of key stages in any review which authorities will be expected to complete. These include not only a consideration of the level at and the way in which a function should be performed, as is described above, but the best value authority's objectives with regard to the function and the extent to which it is meeting any standards and targets which have already been set. The Secretary of State will have a power to make orders setting out what elements will comprise a review, and to issue guidance on them.
24. The section provides the Secretary of State with a power to issue guidance to best value authorities on the form, content and timing of reviews, and may include specific guidance on the way in which the performance indicators and targets should be used in attaining best value. As will be seen under section 6 below, action plans and targets emerging from the conduct of reviews are expected to form a key part of the content of Local Performance Plans.
25. As is provided for at paragraph 7.18 of the White Paper Modern Local Government: In Touch With the People (paragraph 7.26 of the White Paper Local Voices: Modernising Local Government in Wales), section 5 provides the Secretary of State with a power to issue guidance in respect of the main component elements of the review process.
26. Section 6 requires best value authorities to prepare and publish Local Performance Plans (LPPs) on an annual basis. These plans are the main instruments by which best value authorities will be held accountable for delivering best value by their local communities.
27. The section requires best value authorities to produce their plan for the financial year ahead by 31 March, and annually thereafter; and will allow the Secretary of State to alter the date by which plans must be published. The section provides for LPPs to achieve three main functions:
28. The Secretary of State will have a power to make orders in respect of best value authorities setting out the elements which must be included within a Local Performance Plan. He will also have a power to issue guidance in respect of those orders to which best value authorities must have regard.
Sections 7-9: Audit of best value performance plans
29. The Government's approach to scrutiny of best value was set out in both its English and Welsh Green Papers, which included the following principles:
30. Section 7 sets out how Local Performance Plans are to be scrutinised and reported upon. The assessment of a Plan for any given year will be carried out by the auditor who audited the accounts of the authority concerned in the previous year, and, in the light of this, the auditor's rights of access to documents and information under the best value process will closely follow those provided to an auditor in respect of accounts under section 6 of the Audit Commission Act 1998.
31. Under section 7, auditors will be expected to perform the following functions:
Section 7 also provides how and when the auditor will be expected to report publicly on the results of his assessment.
32. In conducting the scrutiny process, auditors will be expected to follow any Code of Practice which the Audit Commission may produce in respect of best value under section 8.
33. Section 9 sets out a best value authority's obligation when it is in receipt of an auditor's report on its local performance plan. In all cases, it will be required to publish the auditor's report. Where the report contains recommendations under subparagraphs 7(4)(c) to (f) in respect of amendments or follow up action needed by the authority, or inspection or intervention by the Audit Commission or Secretary of State, section 9 sets out the further obligations which will apply to the best value authority in question.
34. In such cases, the authority will be required, within 30 working days of the production of the report (or such other period as the auditor may specify), to publish a statement of the action it proposes to take in respect of it, and its timetable for doing so. The statement must also be incorporated into the authority's next local performance plan. In those cases where the auditor has recommended that the Secretary of State use powers of intervention under section 15, the authority will additionally need to send its statement of action to the Secretary of State, again within 30 working days of the production of the report.
Sections 10-15: Best value inspections and intervention35. At paragraph 7.39 of the English White Paper (paragraph 7.53 in Wales), the Government states its belief that, whilst annual audit arrangements of the type described above will be an important form of scrutiny, in themselves they will not always deliver the degree of rigour which the policy requires. It has therefore, within section 10, provided the Audit Commission with a power to carry out inspections aimed at assessing the degree to which authorities comply with the requirements of the best value legal framework.
36. In many cases, these inspections will be programmed so as to allow the inspectors to assess the outcome of reviews under section 5 which are considered above. Paragraph 7.42 of the English White Paper (7.60 in Wales) describes some of the purposes of inspections, which include:
37. In some cases, however, the Government will wish to provide for ad hoc unprogrammed inspections to take place. This might, for instance, be the case where the standard of performance of a function within a best value authority is considered to be well below that required, and there are no immediate plans within the authority to review the function in question. Section 10 provides the Secretary of State with a power to direct the Audit Commission to carry out an inspection of the authority concerned in respect of those functions.
38. The Government intends that the Commission's powers of access to documents and information should be broadly similar to those enjoyed by auditors of accounts, and which are provided under section 6 of the Audit Commission Act 1998. Section 11 provides for this, and also for inspectors to have reasonable rights of access to premises. This latter provision goes beyond the powers of auditors in the 1998 Act, but it is included to take account of the fact that the ability to conduct an inspection of a function such as housing might be seriously inhibited if the inspector were not able to inspect, for example, the manner in which housing repairs were managed and carried out in the authority in question.
39. Section 12 sets out the new powers which the Audit Commission will have to set a scale of fees for best value inspections. This power complements the powers it has to set scales of fees for best value audits, which are set out at section 8. In addition, the Commission will have discretion to charge a fee which departs from any such scale where it judges the amount of work involved in an inspection to be substantially more or less than normal. Before setting a scale of fees, the Commission is required to consult both the Secretary of State and persons which it judges to be representative of best value authorities.
40. As with the audit of plans, whenever inspectors scrutinise reviews the Audit Commission will be expected to publish a report outlining their findings. The sequence of events which follows, and which is provided for at section 13, will vary according to the nature of the findings.
41. In all cases, the Commission will send a copy of its report to the relevant best value authority. Where the report identifies matters in respect of which the Commission believes the authority is failing to comply with duty of best value but which are not considered to be serious enough to be referred to the Secretary of State, then, as is provided for in respect of the audit of Local Performance Plans, the authority will be required to record the failure and the action taken in respect of it within the following Local Performance Plan.
42. Conversely, where an inspection discloses serious failure to comply with the duty which leads to the Commission recommending action by the Secretary of State, then the report will also be sent to the Secretary of State as well as to the authority, and will constitute one of the objective triggers upon which enforcement action, dealt with by section 15, might be based. It will be open to the Commission, in deciding upon whether to recommend intervention, to further recommend to the Secretary of State what the appropriate form of intervention might be.
43. The Government stated at paragraph 7.48 of the English White Paper that it intended that any intervention by Ministers would be based upon objective triggers. These will include not only reports by auditor and inspectors appointed by Commission, but also other forms of inspection activity, including those undertaken by the Social Services Inspectorate, OFSTED (OHMCI in Wales), Her Majesty's Inspectorate of Constabulary, the Benefit and Fraud Inspectorate, and the Fire Inspectorate. They will also include information from other sources which give the Secretary of State concern about whether an authority is meeting the duty of best value. A very serious example of this might be where a child is harmed or put at risk whilst in local authority care; this might give the Secretary of State legitimate concern about the effectiveness of the Social Services Department of the authority in question, such that he may wish to order the authority to immediately review its operation of the function pursuant to section 5-or perhaps, as is provided for by section 15, to order an immediate inquiry.
44. Section 14 amends sections 139A(1), 139A(2) and 139C(1) of the Social Security Administration Act 1992. These provisions set out the powers of authorised inspectors to inspect and report upon authorities' performance in the administration of housing benefit and council tax benefit, and their performance in the prevention and detection of fraud. Section 14 adds a further provision which allows such inspectors to also inspect and report upon such authorities' compliance with the requirements of best value, as set out in Part I of this Act.
45. Section 15 offers the Secretary of State a wide range of intervention powers in response to failures. These include some which are of a procedural nature, and others which involve more substantive action either on the part of the authority (where, for example, it might be required to externalise a function), or on the part of the Secretary of State (who might, in extreme cases of failure, intervene to exercise a function of the authority himself or through a nominee). In any case, where the Secretary of State intends to take action against an authority based upon recommendations of inspectors, he will normally be required to allow the relevant authority to make representations both about the recommendation itself, and the action which is proposed in respect of it.
46. In some cases, however, the Secretary of State may judge the failure so serious, or the immediate risk to sections of the community so great, that he may wish to intervene directly without waiting to consider any representations which the best value authority concerned might wish to make. In such exceptional circumstances, a possible example of which is set out at paragraph 43 above, subsection 15(11) allows the Secretary of State to give a direction to the best value authority without allowing an interval for representations such as is set out at subsections 15(9) and 15(10). However, if the Secretary of State chooses to use his powers under subsection 15(11), he will be obliged to inform both the authority concerned and any appropriate representative body of both the direction, and the reason why it was given, without recourse to the normal procedure allowed for by subsections 15(9) and (10).
47. In cases where the Secretary of State intervenes directly in a best value authority, and in doing so assumes responsibility for delivering a function, subsection 15(7) provides him with a regulatory power which can be used to make alternative provision to address circumstances where he intervenes in a function which already provides recourse to him, either through appeal or otherwise. This regulatory power could also be used where the Secretary of State has an existing role or power in relation to a best value authority. The power could be used, for instance, in situations where the Secretary of State intervened to take over a planning function where there was a pre-existing right of appeal to him. In such a case, subsection 15(7) would allow the Secretary of State to make alternative provision to ensure that individual's rights were properly protected, and to prevent situations arising where the Secretary of State was involved not only in the taking of decisions but also the hearing of appeals against them
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