LOCAL GOVERNMENT BILL
Memorandum by the Department of the Environment,
Transport and the Regions
1. The Local Government Bill received its First
Reading in the House of Commons on 30 November 1998 and was introduced
to the House of Lords on 25 March 1999. This memorandum summarises
the main provisions of the Bill and gives an overview of the delegated
powers. It then identifies each of the powers; describes its purpose;
explains why the matter has been left to delegated legislation;
and explains the degree of Parliamentary control.
2. Part I of the Bill consists of 28 clauses.
The purpose of Part I 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.
3. Secondly, Part I 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
authoritiesincluding councils and police and fire authoritiesto
subject certain work to Compulsory Competitive Tendering (CCT).
4. The purpose of Part II of the Bill, which
contains two clauses and a Schedule, is to enable the Government
to regulate increases in council tax. Part II will firstly 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, Part II will make provision for payments between tiers
of authorities so that any shortfall in council tax benefit arising
from excessive increases in council tax falls on the authority
5. Part III of the Bill consists of a further
five clauses and a Schedule which contain no further delegated
6. The Explanatory Notes, which were first published
on 1 December 1998 and reprinted with appropriate revisions on
26 March 1999, provide detailed information about the background
to these provisions, their purpose and effect.
OVERVIEW OF THE MEMORANDUM
7. Paragraphs 11-18 of this memorandum set out
the general approach to the framework for best value which this
legislation provides, and the rationale for the conferral of delegated
powers in Part I of the Bill. The relevant clauses are then considered
in paragraphs 19-124, with an explanation of the context of each
of the delegated powers as well as the procedures for Parliamentary
scrutiny. Part II of the Bill is covered is paragraphs 125-148.
TYPE OF PARLIAMENTARY SCRUTINY
8. Throughout the Bill, the Government has sought
to achieve some proportionality between the extent of powers and
the level of scrutiny to which they are to be subjected. For instance,
where powers in the Bill materially impact upon other legislation
(such as those set out at clauses 15, 17 and 18), the Government
believes it is only proper that these should be subject to scrutiny
under the affirmative resolution procedure by both Houses of Parliament
in relation to their operation in England.
9. In Wales, powers under clauses 15 and 17
will also be subject to affirmative resolution, as the powers
in question have not been transferred to the National Assembly
and Parliament retains a scrutiny rôle. In relation to clause
18, however, the order-making powers are vested in the National
Assembly and subject to the procedures set out in the consideration
of clause 28 below.
10. In relation to key elements of the best value
process such as those set out in clauses 4, 5 and 6, there is
no such impact upon other legislation; the approach to scrutiny
should ideally build in a consideration of the views of those
best value authority practitioners who will be most directly affected
by them. Each of clauses 4, 5 and 6, as affected by the provisions
set out at subsection 27(2), provide for negative resolution of
any orders made under them; clause 24 further stipulates that
before issuing guidance, the Secretary of State shall consult
best value authorities and those bodies appearing to him to represent
them. The Government believes this to be an appropriate, and at
the same time comprehensive, level of scrutiny for these powers.
11. The legislative framework creating the duty
of best value is set out in Part I of the Bill. This sets out:
- the list of bodies which will be subject to the
- the general duty of best value itself;
- the key aspects of best value process which all
best value authorities will be expected to carry out;
- arrangements for audit and inspection;
- the framework for creating new powers;
- arrangements for the transition from CCT to best
- miscellaneous provisions including changes to
relevant police legislation, creation of an accounting framework,
and specific arrangements for the application of the duty of best
value in Wales.
12. The Government is determined, in putting
in place the new duty of best value, not to repeat the very prescriptive
approach which it considers was a key feature of CCT legislation.
Instead, it wishes to create a framework which gives best value
authorities as much flexibility in the management of their functions
as possible, and which allows them to balance the need for some
consistency nationally with the need to take proper account of
local circumstances and the priorities of local people.
13. It also wishes to make sure that the duty
of best value works in such a way that local government has the
capacity to forge closer relationships with local business communities
and other agencies in order to deliver local services in the most
efficient and effective manner possible.
14. The Government believes that these objectives
are best served by ensuring that the legal framework is transparent,
facilitates meaningful comparisons and ensures that the pace at
which improvement is achieved is driven by what the best authorities
are able to do.
15. The introduction of a duty of best value
is only the first of a range of measures which the Government
intends to take in order to modernise local government. In doing
so, it aims to make local government more relevant, and more responsive
to the needs of the public which they serve. Put simply, the Government
believes that local people should have a proper voice in determining
what kind of services they receive, and should be entitled to
expect high quality services no matter where they live.
16. This Bill therefore puts a high premium upon
the importance of consultation with the local community. It creates
a specific statutory duty of consultation at clause 3, which embraces
all sections of that community. It creates a general duty of best
value which is owed to local people, not to the Secretary of State.
And it places authorities under a statutory duty to report to
their local communities not only what they have achieved but also
their plans for the future, and how their plans and their performance
compare with the achievements of others.
17. The Government also recognises that it is
legislating in this Bill for a rich diversity of individual authorities,
carrying out different functions to different timetables. It is
therefore important that the legislation is permissive, allows
for the development of a wide range of approaches to service delivery,
and is capable of evolving over time. This is especially important
in view of the work which is being carried out by the best value
pilot projects in England and Wales. The Local Government Association
and the Audit Commission will identify and disseminate information
about what works well in practice. The legal framework needs to
be able to reflect this.
18. The Bill also makes appropriate provision
for flexibility in terms of the way that best value is introduced
in Wales. The way in which it provides powers to the National
Assembly for Wales is consistent with the terms of Welsh devolution
set out in the Government of Wales Act 1998: the Bill provides,
in most but not all cases, for references to the Secretary of
State to be substituted by a reference to the National Assembly.
Most importantly, it provides the Assembly with the discretion
it needs to ensure that the duty of best value in Wales is introduced
in a timely manner which nevertheless reflects local circumstances.
CLAUSE 2: POWER TO EXTEND OR DISAPPLY
19. Clause 2 provides the Secretary of State
with order-making powers to either:
- extend the application of best value to new bodies,
or to accommodate new circumstances; or
- disapply the duty in relation to specified functions,
if certain criteria are met.
EXTENDING THE DUTY
20. The Local Government White Papers*
made it clear that the Government intended to apply the duty of
best value to local government bodies that enjoy tax-raising or
precepting powers (including the Greater London Authority (GLA)
and its constituent bodies, subject to the passage of the Greater
London Authority Bill which is also currently before Parliament),
and also levying bodies (such as combined fire authorities).
21. Clause 1 sets out those bodies to which the
Government wishes to apply the duty immediately. But it also wishes
to have flexibility to extend the scope to any new precepting
and levying bodies which are created in the future. Examples of
bodies to which the duty might be applied in this way include
the London Magistrates Court Authority and the London Pension
Fund Authority, although decisions on this have yet to be taken.
22. The Government has also taken powers at subsection
2(4) which are designed to ensure that the duty of best value
applies to as much of the work of the GLA as possible. At present
the Bill, through clause 1, applies the duty of best value to
the GLA, insofar as it exercises its functions through the Mayor,
and to each of its four subsidiary bodies: the Metropolitan Police
Authority (MPA), Transport for London (TfL), the London Development
Agency (LDA) and the London Fire and Emergency Planning Authority
23. However, the Government recognises that it
may be appropriate, in due course, to apply the duty of best value
- functions exercised by the Assembly of the GLA
(which may include corporate functions such as recruitment of
- functions which the Mayor and Assembly exercise
- functions where one of more of the GLA bodies
combine together, or with other best value authorities, to deliver
24. An example of the last might be the relationship
between the Mayor and TfL, where the Mayor retains responsibility
for the exercise of a strategic rôle as regards transport
and TfL retains the responsibility for operational transport matters.
The Government believes that the duty of best value should be
capable of being applied to each body in respect of the functional
rôle it carries out.
25. The precise nature of these relationships
remains to be finalised, and the Committee will be aware that
the primary legislation creating the GLA is currently passing
through Parliament. But in framing clause 2 as currently drafted,
the Government believes it has ensured that the duty of best value
will be capable of being applied to the fullest possible range
of the work of the GLA, with clear lines of accountability being
preserved for each of the key components of it. The order-making
powers in subsection 2(4) are clearly crucial to this.
DISAPPLYING THE DUTY
26. It is the Government's intention that the
duty of best value should apply as broadly as possible. Nevertheless,
it recognises that to apply the full duty to some smaller bodies
will, in certain cases, be onerous. And in certain cases there
may be a rationale for exempting certain functions from the duty
in particular classes of authority.
27. The most practical example of this is the
position of town and parish councils in England and community
councils in Wales. The Local Government White Papers set out the
Government's intention to exempt the smaller bodies of this type
by applying a financial threshold, based on annual expenditure,
below which the duty would not apply. The Government takes the
view that this financial threshold would need to be carefully
chosen, and capable of review to take account of changing circumstances.
28. It is therefore not attracted to naming specific
bodies, or setting a specific financial threshold upon the face
of the Bill. It prefers to introduce variations in the duty of
this type by order, in much the same way as was used under subsection
6(3) of the Local Government Act 1988 to set de minimis
levels for professional services which were subject to CCT. Order-making
powers under subsection 2(5) will enable the Government to achieve
its objectives in a way that takes account of the different circumstances
in which local government bodies operate, and which can be adjusted
over time to take account of how best value operates in practice.
The Government is already in consultation on these matters with
the Local Government Association (LGA), the National Association
of Local Councils, the Society of Local Council Clerks, and the
Audit Commission. A similar consultation process is underway in
Wales with the Welsh Local Government Association, the Association
of Community and Town Councils, and the North Wales Association
of Town Councils.
29. Clause 2 is significant in that the use of
the order-making powers within it can materially affect the extent
of the duty of best value, either by extension or disapplication.
In view of this, the Government believes that the use of order-making
powers should be subject to affirmative resolution by both Houses
of Parliament. Subsection 2(6) provides for this in respect of
England. The position in Wales is considered in relation to clause
CLAUSE 4: PERFORMANCE INDICATORS AND STANDARDS
30. Clause 4 provides the Secretary of State
with order-making powers to specify performance indicators and
performance standards in respect of a best value authority's functions;
clause 26 provides that such orders should be subject to negative
31. In developing this policy, the Government
has adopted the following definitions:
- Performance indicators are
a measure of an authority's performance.
- Where appropriate, performance standards would
set out the minimum acceptable level of service provision.
32. To deliver best value, authorities will need
to establish where improvements are most needed. To do this, they
will need to be able to assess their performance, know what local
people think of that performance, and show how performance compares
to that of other authorities.
33. Under the new framework, three bodies will
have the power to set performance indicators:
- The Government will set national performance
indicators for the main functions, reflecting the national interest
in local services.
- The Audit Commission will retain its powers under
the Audit Commission Act 1998 to specify indicators. The Government
expects it to set indicators which would provide a more rounded
view of performance around the national set of indicators. The
Government will seek to agree a memorandum of understanding with
the Audit Commission to make their respective rôles clear.
- Best value authorities will be expected to set
their own local performance indicators, to reflect local characteristics
and local priorities. The Government expects these indicators
to outweigh the number of prescribed national indicators.
34. Clause 4 allows the Secretary of State to
specify different indicators and standards for different authorities,
and to apply these at different times, with the aim of promoting
improvement in the way authorities carry out their functions,
having regard to a combination of economy, efficiency and effectiveness.
The Government will have regard to the views of the Audit Commission
in developing those indicators and standards. Government amendments
at Commons Report stage, in response to debates in Committee,
have provided for wide consultation with local government, the
Audit Commission and others in this respect.
35. The Government believes that order-making
powers are the most appropriate method of putting this system
in place. It is likely that the suite of indicators and standards
which the Secretary of State will specify will change over time
(in practice, there could be annual revisions). For this reason,
it would not be practicable to place the individual indicators
and standards on the face of the Bill. Nor would guidance be sufficient:
it would offer flexibility, but it would not have the same force.
The Government considers it essential that the indicators and
standards specified by the Secretary of State are applied consistently
by best value authorities. The information so provided will offer
a means of comparison between authorities (both for local people
and for authorities themselves), and a means of judging the progress
that is being made by individual authorities. If the elements
of this framework are not consistent, the whole performance management
system will be undermined.
36. The Audit Commission currently has a duty
(which it will retain), under Sections 44 and 46 of the Audit
Commission Act 1998 to give such directions as it thinks fit for
requiring relevant bodies to publish information relating to their
activities in any financial year. This is to be information that,
in the Commission's opinion, will facilitate the making of appropriate
comparisons between standards of performance achieved by different
relevant bodies in that financial year, and the standards of performance
achieved by such bodies in different financial years. The last
such direction was issued in December 1998.
CLAUSE 5: BEST VALUE REVIEWS
37. Clause 5 of the Bill is concerned with best
value reviews. It indicates the main elements which may make up
reviews, and sets out the Secretary of State's powers in respect
of them. The review process is a crucial part of best value, ensuring
local authorities consider the key options for improving performance.
38. In normal circumstances, the inspection process
which is set out at clauses 10-13 of the Bill will scrutinise
the manner in which best value authorities carry out best value
reviews, and the outcomes which flow from them in terms of performance
targets and action plans. The objectivity of that scrutiny will
in large part be informed by the extent to which best value reviews
are broadly consistent in terms of the processes which they undertake
and the rigour with which they are carried out.
39. Clause 5 achieves that broad degree of consistency
by providing for four powers to be exercised by the Secretary
- subsection 5(2) enables the Secretary of State
to specify by order a period within which an authority is to review
all its functions;
- subsection 5(4) enables the Secretary of State
to specify by order matters which an authority must include in
a review of a function;
- subsection 5(5) provides that the Secretary of
State may issue guidance on the timing, procedure, form and content
of a review;
- subsection 5(7) further provides that guidance
may state matters to be taken into account in setting performance
40. If improvements are to be made, and fair
and proper comparisons between different best value authorities
achieved, the timetable for the reviews will need to be both demanding
and consistent in application. It is therefore planned that initially
the period of review should be set at five years. However, the
Government is not persuaded that this period should appear on
the face of the Bill. On occasions there may be circumstances
which merit an individual authority or group of authorities being
given a different time period over which to complete their reviews.
Although five years will be the norm, the Secretary of State needs
to have the ability to consider such cases, and to vary requirements
where it is appropriate. The discretionary power set out at subsection
5(2) allows for this.
41. In carrying out reviews, it is essential
that all authorities address certain key factors and genuinely
challenge the status quo. The degree of rigour involved in best
value should be the same for all. The Government believes that
the best way to ensure this consistency is to set down these key
elements by means of a statutory instrument. It does not consider
it appropriate to detail these key elements on the face of the
Bill since their content will evolve over time on the basis of
experience. Lessons will be learnt as the first reviews are completed,
and there must be the flexibility to alter the key requirements
to reflect these, as well as to incorporate best practice as it
emerges. The Government believes that the order-making powers
set out at subsection 5(4) are the most appropriate means of achieving
these policy objectives.
42. By the same token, it is not possible to
anticipate all the circumstances that need to be addressed in
the reviews, and the Government needs to be able to react flexibly
and sensibly to reflect the different approaches to best value
reviews which develop over time. The guidance powers as set out
at subsections 5(5) and 5(7) allow for this. Appropriate guidancesuch
as that arising from the work being done by the best value pilotsand
advice reflecting the lessons learnt as the first and subsequent
reviews are undertaken will be necessary as authorities go forward.
It is essential that the Government has the ability to issue guidance
covering the form and nature of review activity, including the
setting of appropriate performance targets and the manner in which
reviews should be carried out and reported upon.
CLAUSE 6: BEST VALUE PERFORMANCE PLANS
43. Local Performance Plans (LPPs) are a key
output from the best value process, as they will be the principal
means by which best value authorities are held accountable to
local people for the delivery of best value.
44. The LPP should be a readily accessible, transparent
document which provides an accurate picture of what an authority
has achieved, the extent to which it has met targets, its future
plans for improvement and how its performance compares with that
45. Clause 6 includes the following powers:
- at subsection 6(2), order-making powers for the
Secretary of State in respect of matters to be included in a performance
- at subsection 6(3), power to vary the date by
which the plan must be published, again by order;
- at subsection 6(4), power for the Secretary of
State to issue guidance on the form and content of plans.
46. As with best value reviews, the proper scrutiny
of LPPs will be most effective and objective if it is carried
out against a set of broadly consistent criteria. For this reason
the Government believes it is important that all authorities include
a common set of key elements in their LPPs. Only in this way can
local people properly judge the improvements that are being made
in the delivery of services, and compare them with those being
achieved elsewhere. The Government does not believe it is sensible
to include these key elements on the face of the Bill because
LPPs, if they are to be effective will, like best value reviews,
need to evolve over time. Lessons will be learnt as the first
plans are published and flexibility is required to alter the key
requirements to reflect these as necessary.
47. The Bill, at subparagraph 6(3)(a), provides
that LPPs must be published by the authority by 31 March each
year, for the financial year that follows. The Government considers
this an appropriately challenging date which will ensure that
local people will have key information available to them at the
start of the year and in good time for any local government elections.
48. The Government also recognises that there
may be circumstances when it might be appropriate to vary the
31 March publication date. This might arise if the timetable for
reviewing functions, collecting performance information or auditing
of the plan needed to be adjusted in the light of practical experience.
The ability to vary the date by order is therefore a prudent measure
which ensures that as best value evolves, the legislative framework
is sufficiently flexibly drawn to accommodate it.
49. In Wales, it will be for the Assembly to
determine whether to introduce the 31 March deadline set out at
subsection 6(3)(a), or whether to vary the date by order under
50. Subsection 6(4) enables the Secretary of
State to issue guidance on the form, content and manner of publication
of LPPs. Many of the considerations regarding format, content
and publication of LPPs will be left for local determination.
However, appropriate guidancesuch as that arising from
the work being done by the best value pilots and advice reflecting
the lessons learnt as the first and subsequent plans are publishedwill
be invaluable in building on the effectiveness of LPPs. As LPPs
are to be assessed by auditors for compliance with best value,
any guidance that establishes some common guidelines will inevitably
assist in this process.
CLAUSE 7: AUDIT
51. Subparagraph 7(6)(a) specifies that the best
value auditor should send a copy of his report on the LPP to the
best value authority concerned by 30 June each year, following
publication of the plan in question (which has to be done by 31
March). Subparagraph 7(6)(b) further provides that the Secretary
of State may vary the date by order. In Wales, it will be for
the Assembly to determine whether to introduce the 30 June deadline
set out at subparagraph 7(6)(a), or whether to vary the date by
order under subparagraph 7(6)(b).
52. The Bill specifies 30 June as the date by
which LPPs have to be audited, in order to balance the need for
a prompt commentary on the plan with the need to allow auditors
sufficient time to make an objective assessment of it. However,
it seems prudent to allow for the possibility of the date being
varied for a number of reasons. The date set needs to have regard
to the date of publication of the LPPs, which could also be varied
by order in the Bill as drafted. As explained in the context of
clauses 4-6 above, the best value framework has been designed
so that it can respond to, and evolve in line with, practical
experience. There may in future be changes to the way in which
plans are prepared or accounts audited which would make an earlier
or later date preferable for the production of an accurate and
informative plan. The Government therefore wishes to retain the
flexibility inherent in these delegated powers and believes that
the negative resolution procedure provided for in clause 27 is
reasonable in this case.
CLAUSE 8: CODE OF PRACTICE AND FEES
53. Subsection 8(4) provides for the Audit Commission
to prescribe a scale of fees for the audit of LPPs. Before doing
so, the Commission is required under subsection 8(6) to consult
both the Secretary of State and persons appearing to it to represent
best value bodies.
54. The provisions are subject to the same conditions
contained in subsections 7(3) to 7(8) of the Audit Commission
Act 1998. Subsection 7(8) of that Act provides that the Secretary
of State may by regulations prescribe a scale of fees to have
effect in place of those prescribed the Audit Commission; subsection
52(3) provides that such regulations shall be subject to annulment
in pursuance of a resolution in either House of Parliament.
55. When using subsection 7(8) of the 1998 Act,
the Secretary of State of State is required under subsection 8(7)
of the Bill to consult the Commission and persons appearing to
the Secretary of State to represent best value bodies. This provision
allows for the protection of best value bodies in the event that
the Commission prescribed an excessive fee scale. However, it
may help the Committee to clarify that it has never been used
in practice for audits under the 1998 Act.
CLAUSE 10: INSPECTION
56. Clause 10 of the Bill sets out the broad
framework of powers for best value inspections. The Government
believes that its policy objectives are best served by a robust
and independent system of scrutiny of the manner in which best
value authorities comply with the duty of best value; inspection
is very much part of this. The decision to provide the powers
of inspection to the Audit Commission under subsection 10(1) has
been taken in the light of its status as an independent non-departmental
public body, and its acknowledged expertise in undertaking comparative
studies of local government and in addressing value-for-money
57. Subsection 10(2) further provides that the
Secretary of State may direct the Audit Commission to inspect
an authority's compliance with the duty of best value.
58. Inspection will provide a way of checking
that an authority is applying best value appropriately to each
function. It allows for the performance of an individual service,
for example, to be considered in detail, and scrutinise an authority's
own fundamental performance review. Under normal circumstances
there will be a programme of inspections drawn up in advance which
will allow an authority's own timetable for reviews to be taken
into account. The facility for the Secretary of State to direct
the Audit Commission to carry out an inspection will be used only
where he has concerns about the way in which a function is being
carried out. Such concerns may reach him in a number of wayssuch
as a press campaign, representations by local people, or as a
result of a police investigation. In such cases the Secretary
of State may judge it inappropriate to wait for the planned programme
of inspection; a timely and rigorous study may be the best way
to ensure that local stake-holders receive best value for that
particular service, or to decide whether it is appropriate to
exercise powers of intervention as provided for under clause 14.
59. Further details as to how intervention will
work in practice is set out in the draft Protocol which is attached
at Annex A. This draft Protocol has been developed for England,
and separate discussions on a suitable format for a similar Protocol
are underway in Wales.
60. Subparagraph 10(4)(b) allows the Secretary
of State to issue guidance on the conduct of inspections. The
Audit Commission will use the powers conferred on it by the Bill
to work alongside other existing statutory inspectorates which
specialise in services or sectorssuch as OFSTED and the
Social Services Inspectorate. The Government attaches great importance
to the professionalism and independence of all the inspectorates.
The purpose of the guidance will be to ensure that the Audit Commission
has due regard to national and local priorities, and to ensure
that its remit complements that of the existing inspectorates.
The Secretary of State will be required to consult authorities
and the Commission before issuing guidance, and must arrange for
that guidance to be published.
61. These statutory requirements will sit alongside
a non-statutory Inspectorate Forum, operating separately in England
and Wales, which will be established to discuss common inspection
interests and ensure the smooth and efficient operation of the
CLAUSE 12: FEES
62. Clause 12 allows the Audit Commission to
prescribe a scale or scales of fees for best value inspections.
The Commission is obliged to consult both the Secretary of State
and persons representing best value authorities before setting
a scale of fees. Whilst this power is for the Audit Commission
rather than the Secretary of State, the Government recognises
concern that this power is delegated; it is important, however,
that the inspected authorities share the costs of inspection.
Provision is also made for part of the funding to be provided
by grant from central government (DETR or the National Assembly
63. The Government believes that the flexibility
allowed by subsection 12(3) is necessary to allow for variations
in the complexity and sensitivity of different inspections. Where
a service has a history of problems, for example, or the authority
has radically changed its approach, it may be clear that the fee
will need to be higher than usual. On the other hand, where a
service is not outstandingly significant or where the review process
has been well documented, the inspection may be tailored accordingly
with an appropriately smaller fee. The Government believes that
the consultation process prescribed by subsection 12(4) will ensure
that the scale of fees, as well as being flexible, is also appropriate
CLAUSE 13: REPORTS
64. Clause 13 sets out the manner in which the
Audit Commission reports on any inspection of a best value authority
which it carries out. Subsection 13(3) places the Commission under
an obligation to send a copy of an inspection report to the authority
concerned, and clause 13 provides the Commission with a discretionary
power to publish the report and any information in respect of
it. This extends its powers to publish information as set out
in the Audit Commission Act 1998, but it is important that the
Commission, in pursuing its functions under best value, should
be able to publish information relating to those functions where
i6t views publication to be in the public interest.
CLAUSE 14: SECRETARY OF STATE'S POWERS
65. Clause 14 provides the Secretary of State
with new powers to intervene in 'failing' authorities to secure
compliance with Part I of the Bill. It provides him with a range
of measures to allow for flexible and constructive intervention
to address serious and persistent failure in the delivery of services
by best value authorities. Given the seriousness of the issues
that could be involved, the Government takes the view that these
powers should be exercised by Ministers rather than by the Audit
Commission itself. It is also important not to leave auditors
and inspectors as both judge and jury where action is needed.
The range of possible measures has been cast widely so that the
form and nature of intervention can be matched against the degree
of seriousness of the failure. The Government believes that this
will allow for a measured approach to intervention, with the most
significant action reserved only for the most serious cases of
66. Subsection 14(2) contains provisions for
relatively minor intervention right through to more significant
intervention. It provides the Secretary of State with powers to
direct a best value authority to undertake actions to secure best
value. This includes requiring an authority to, for example, prepare
or amend a performance plan or follow specified procedures in
relation to a plan.
67. Although this clause contains new powers,
there are precedents for powers of the sort set out in subsections
14(2) and 14(5). The School Standards and Framework Act 1998 provides
powers similar to those contained in subsection 14(2) for the
Secretary of State for Education to intervene in failing local
education authorities; the Local Government Act 1998 and the Local
Government (Contracts) Act 1998 all contain provisions for work
to be re-tendered or other action to be taken. Under section 9
of the Social Security Administration (Fraud) Act 1997, the Secretary
of State may require an authority to contract out all or part
of its Housing Benefit/Council Tax Benefit administration.
68. In addition, there are provisions for the
Secretary of State to take over a function from an authority under
section 164 of the Housing Act 1985 (previously in section 23
of the Housing Act 1980). In the case of Norwich City Council
versus the Secretary of State for the Environment (1982),
the Secretary of State decided to use this power; Norwich Council
commenced judicial review proceedings against the Secretary of
State, but lost the case. This case illustrates when and how the
Secretary of State is justified in using the powers under section
164 of the Housing Act 1995. Although the powers are more restrictive
than those in subsection 14(5) of the Local Government Bill and
can only be used in a limited set of circumstances, there is clearly
a precedent for this type of intervention.
69. Subsection 14(5) could be used to address
more substantive failures including serious and long-term systemic
failure, where the authority has failed to act despite having
been given the opportunity to do so. Intervention using these
powers may be on a longer time-scale, although it need not always
be so. This is a more radical form of intervention where the Secretary
of State could exercise himself the function of the authority,
or nominate another body to do so on his behalf. The Secretary
of State would in these circumstances be responsible for the discharge
of the authority's functions.
70. The type of circumstances in which the powers
contained in subsection 14(5) might be used include cases where
an authority has continued to fail to meet an important national
performance standard, or has persistently and excessively high
unit costs (by comparison with other councils) which are not necessarily
offset by higher quality services or explained by a greater level
of need. These powers could also be used as a last resort if an
authority refused to draw up and implement an action plan following
a critical inspection report, where action was considered essential.
71. These powers will be used as a last resort,
and authorities will normally be given the opportunity to address
problems themselves before any direction is issued under this
clause. In some cases the severity or persistence of failure,
or the continuing risk of harm or financial loss, may show that
urgent intervention is necessary. If these circumstances prevail,
and an authority could reasonably be expected to be aware of the
problems and has failed to take action to address them, then subsection
14(8) provides the Secretary of State with the discretion to abbreviate
the intervention procedures as he sees necessary. When intervening
in this way, subsection 14(9) provides that the Secretary of State
must notify the authority and the representatives of best value
authorities of the intervention that is necessary, and provide
a full explanation of his reasons for curtailing the procedures.
72. There are a number of safeguards to ensure
that intervention powers are not used in an arbitrary manner or
otherwise abused. The Bill provides authorities with the opportunity
to make representations about the report (if any) as a result
of which intervention is proposed and about the nature of the
intervention proposed, except in the most urgent of cases where
the abbreviated procedures are used. The Secretary of State must
have regard to any statement of action produced under subsection
9(2). These provisions would allow the authority's views to be
heard and provide it with the opportunity to act itself to improve
73. Subsection 14(3) provides the Secretary of
State with the power to direct a local inquiry to be held into
the exercise of specified functions by a best value authority.
This serves two important purposes: it enables the Secretary of
State to ensure that he has all the relevant facts and information
before intervening; and it provides for the views of local people
to be taken into account. Subsection 14(4) provides that an inquiry
which the Secretary of State directs to be held under this section
will be subject to subsections (2) to (5) of section 250 (inquiries)
of the Local Government Act 1972.
74. Non-statutory safeguards will take the form
of a Protocol on Intervention which will be agreed between central
government and the LGA under the Framework for Central Local Partnership
(a copy of the draft protocol is at Annex A). The Protocol will
set out the principles underpinning intervention and the broad
procedures to be followed by both parties.
75. The concept of proportional response is one
of the key principles of the Protocol. The draft Protocol recognises
that the form and extent of intervention should reflect the type
and seriousness of failure and the need for effective improvement.
There is also an overriding requirement for the Secretary of State
to exercise his powers in a reasonable manner, and such decisions
could be tested by judicial review.
76. Another important principle is that the Secretary
of State must always inform an authority of the reasons for intervention
before using his powers under best value legislation. A further
principle reflects the wish to give authorities the opportunity
to make the necessary improvements themselves before intervention
is taken further. This approach has the added benefit of ensuring
that there is a clear link between the seriousness of failure
and the nature of the intervention in respect of it.
77. The Protocol also contains a section on the
rôle of the LGA in helping authorities at risk of failure.
CLAUSE 15: POWER TO MODIFY ENACTMENTS AND CONFER
78. Clause 15 gives the Secretary of State order-making
powers to modify or exclude the application of enactments to best
value bodies or to confer new powers on them where this would
assist them to comply with the duty of best value. In addition,
he will have the power to impose conditions on the way authorities
exercise any new or modified powers conferred in this way. These
powers will not be conferred upon the National Assembly for Wales:
the Government takes the view that such powers should be exercised
by Ministers accountable to Parliament. In recognition of the
powerful nature of these provisions, the Bill provides for affirmative
resolution of orders made under this clause, as part of a robust
79. The purpose of these powers is to ensure
that best value authorities are able to consider as wide a range
of service delivery options as possible in meeting their responsibilities
for best value. Given the quickening pace of technological and
other forms of change, the Government wishes to be in a position
to respond quickly and flexibly to enable local authorities to
secure potential benefits for local people.
80. Local authorities have accumulated their
powers and responsibilities gradually over the years. Ancillary
powers have generally been conferred in an ad hoc way to
support new functions taking account of past methods and current
practice. Experience has shown that where authorities have tried
to develop new ways of delivering their responsibilities, existing
powers have been inadequate to deal with changed circumstances.
At times, the law has appeared to be unclear; at other times it
has hindered necessary innovation. Best value is intended to encourage
innovationfor example, by promoting new methods of service
delivery which are more responsive to the needs of the user.
81. Key areas where action might be taken are
arrangements for the pooling of budgets and other resources between
best value authorities and other public sector bodies, and specific
powers to form companies and other vehicles for joint ventures
and partnerships. Further examples of potential changes to existing
legislation and the new ways in which authorities might be empowered
are discussed at Annex B. With the power to set conditions in
this context, the Secretary of State will be able to ensure that
any new arrangements will not expose public funding to unacceptable
risk, or give authorities undue advantage in the market-place.
82. The high degree of flexibility which will
be required argues against detailed provisions on the face of
the Bill. However, these are very powerful provisions and the
Government believes that it is right that they should be subject
to stringent scrutiny. The provisions themselves are modelled
to an extent on the Deregulation and Contracting Out Act 1994,
as are the scrutiny arrangements. Clause 16 of the Bill, for example,
requires the Secretary of State to undertake full consultation
on the proposals, and for the proposals and the consultation results
to be put to Parliament before the order-making process itself
CLAUSE 17: CONTRACTING OUT
83. Subsection 17(1) extends the application
of section 70 of the Deregulation and Contracting Out Act 1994
to the functions of all best value authorities.
84. Section 70 of the 1994 Act enables the Secretary
of State to contract out the functions of local authorities to
others. It is appropriate for all best value authorities to be
able to have access to this provision in order to ensure the delivery
of best value. Orders under section 70 have to be approved by
resolution of both Houses of Parliament.
85. In Wales, in line with the Government's
current approach to Part II of the 1994 Act, the Bill provides
that these powers will be exercised by the Secretary of State
rather than the National Assembly.
CLAUSE 18: CONTRACTS: EXCLUSION OF NON-COMMERCIAL
86. Subsection 18(1) enables the Secretary of
State to remove non-commercial matters from the list specified
in section 17 of the Local Government Act 1988. The Secretary
of State already has powers in section 19 of the 1988 Act to add
to the list of non-commercial matters.
87. The exercise of any powers conferred by
this clause would enable Ministers to bring local government contracting
into step both with developments in public procurement practice
and with the needs of best value. For example, work force matters
are currently specified as non-commercial in the 1988 Act and
therefore cannot be considered as far as local authority contracting
is concerned. As a result, the Government takes the view that
local authorities are unable to make a proper assessment of contractors'
management and work force practices, on such things as training
and skills, even where they are relevant to the quality and value
for money of a contract. This restriction does not apply in the
same way to the rest of the public sector and is a hindrance to
authorities in meeting the best value duty.
88. The Government recognises the need to use
the new power carefully and with due regard to the views of local
government, the private sector and trade unions. It is important
that any changes are made in the interests of best value and do
not offer an opportunity for unfair competition. Subsection 18(4)
also requires best value authorities to have regard to any guidance
issued by the Secretary of State following the exercise of the
new power. This is necessary to enable Government to provide the
background and rationale for the changes, and to ensure that authorities
do not misconstrue the Government's purpose in revising the non-commercial
89. The Government has proposed delegated powers
for this purpose because of the possibility that the definition
of a non-commercial matter may need to be further revised in the
future to reflect changes in public procurement practice, some
of which may emanate from European legislation. The 1988 Act already
provides for additional non-commercial matters to be specified
by order; the proposed power will therefore balance the existing
90. In recognition of the need for appropriate
scrutiny of the exercise of the power provided by clause 18, an
order made under this provision will be subject to the affirmative
resolution procedure in both Houses of Parliament.
CLAUSE 20: TRANSITION FROM COMPULSORY COMPETITIVE
TENDERING TO BEST VALUE
91. Clause 20 of the Bill provides for the repeal
of CCT legislation on 2 January 2000.
92. Subsection 20(2) enables the Secretary of
State to issue guidance to authorities relating to the transitional
period between the abolition of CCT and the introduction of the
duty of best value. The Government intends to use the guidance
powers under these subsections to assist authorities in managing
that transition. Statutory guidance is needed to send a clear
signal on the obligations of authorities during this period, as
well as to ensure an orderly changeover from one regime to the
other. The transition period runs from 2 January until the duty
of best value is introduced, which in England is expected to be
on 1 April 2000.
93. One example of the way in which the guidance
might be used is to ensure that authorities consider how procurement
and contractual arrangements should be approached in the light
of the early application of best value and to advise authorities
on how to demonstrate the competitiveness of their service delivery
during this period. This might include advice as to the way in
which tendering in progress at the time of abolition might be
handled so as to avoid nugatory expenditure or legal action by
private sector companies.
94. Guidance may also be needed as to how to
incorporate evidence of compliance with certain CCT requirements
into authorities' early best value reviews. This could provide
a basis of comparison in the summaries of performance which they
will be required to produce under best value. Where an authority
has incurred a financial loss on a defined activity in the final
year of CCT, for instance, they will wish to identify in their
Local Performance Plan any action taken to bring the level of
performance up to a satisfactory standard. Guidance may also be
required on the accounting arrangements for the whole of the 1999/2000
financial year, to avoid two different sets of accounts for the
95. All guidance will be subject to consultation
with interested and affected parties or their representatives,
as set out in clause 25 below.
CLAUSE 21: AUDIT COMMISSION
96. Clause 21 makes a number of changes to legislation
affecting the Audit Commission to take specific account of its
duties and powers under best value. This Bill confers new powers
and duties upon the Audit Commission, most notable in respect
of best value inspections. In practice, the work may be carried
out by committees, sub-committees and by officers employed by
the Commission. The Commission wishes to have the ability to delegate
best value work to those bodies and persons who are best placed
to carry it out; subsection 21(2) provides them with the ability
to do so. This power of delegation is confined in its extent to
best value functions of the Commission only.
97. The clause also provides a power to the
Housing Corporation (in England, and the Secretary of State in
Wales), to provide appropriate assistance and advice to the Audit
Commission in relation to the Commission's relevant best value
functions. Clause 21 additionally provides a power for the Commission
to make payment to the Corporation in respect of any such advice
or assistance it might provide. The Government believes that the
Housing Corporation has a potentially useful rôle to play
in best value, particularly in offering relevant expertise in
the housing field to the Commission. Clause 21 gives the Corporation
a clear statutory power to exercise such a rôle, at the
discretion of the Audit Commission, and allows for reimbursement
of the Corporation in respect of any support it provides.
CLAUSE 22: ACCOUNTS
98. Clause 22 provides the Secretary of State
with powers to make regulations governing how best value authorities
prepare, keep and certify accounts, and about the depositing,
publication, and inspection of those accounts.
99. The Government is committed to the creation
of a common, transparent accounting framework under best value.
This clause should be read in conjunction with clause 19, which
imposes a common requirement with regard to the publication of
100. In allowing the Secretary of State to make
regulations governing the way in which best value authorities
prepare, keep and certify accounts, the clause puts the accounting
requirements for best value on a firm statutory footing; this
will enable differences in financial performance to be compared.
101. The clause closely follows the precedent
set by section 27 of the Audit Commission Act 1998 in setting
requirements for prior consultation by the Secretary of State.
The Secretary of State will, before making regulations, consult
with the Audit Commission, with best value authorities and their
representatives, and with relevant professional bodies. This is
a comprehensive process which allows the Secretary of State to
take specific account of the work which the Chartered Institute
of Public Finance and Accounting (CIPFA) and the LGA are currently
undertaking to identify recommended accounting practices.
102. Clause 22 does not alter what is current
practice. Although the powers would be vested in the Secretary
of State, in practice CIPFA are charged with identifying best
accounting practice for inclusion in relevant Codes of Practice.
CIPFA are centrally involved in the Best Value Accounts Working
Group which is considering these issues, and the Secretary of
State will take careful account of that Group's findings before
deciding how to use these regulatory powers.
CLAUSE 23: POLICE
103. Subsections 23(2) and (3) amend section
54 of the Police Act 1996 to provide new powers of inspection
to Her Majesty's Inspectorate of Constabulary (HMIC).
104. At present, HMIC has powers to inspect police
forces (which are not best value bodies), but not police authorities
(which are). This amendment gives HMIC a power to inspect police
authorities for the purposes of best value.
105. The Government attaches great importance
to the creation of a robust system of scrutiny within the best
value framework. This scrutiny is provided by arrangements set
out in respect of the audit of Local Performance Plans (clauses
7-9), and of periodic inspection (clauses 10-13). All bodies subject
to best value should be scrutinised as thoroughly as possible,
so that local people have an objective basis upon which to judge
their performance. The Government believes that HMIC has a key
rôle to play in combining its knowledge of operational policing
issues with the Audit Commission's skills in assessing efficiency
106. This clause is designed to encourage further
joint working with the Audit Commission and give HMIC a clearly
defined rôle within best value. However, the extent of the
new delegated power for HMIC will be for the purposes of best
value inspections only. The Government believes that a limited
delegation is sufficient to enable it to achieve its policy objectives.
107. As far as other Inspectorates are concerned,
for example OFSTED and the Social Services Inspectorate, the Government
has sought wherever possible to rely upon the use of existing
powers wherever the Inspectorates themselves and their sponsoring
Departments are of the opinion that the powers are sufficient
to enable them to play an effective rôle in best value.
CLAUSE 24: CO-ORDINATION OF INSPECTIONS
108. Clause 24 gives effect to a commitment which
the Government made in the Local Government White Papers in England
and Wales, to take powers necessary to ensure the smooth and efficient
working of the inspection process.
109. As well as the Audit Commission, a number
of existing statutory inspectorates will have an important rôle
in best value. The Government attaches great importance to achieving
collaboration between these bodies to ensure that sensible arrangements
are made for the scheduling of inspections, development of effective
methodologies and common perspectives on how best value inspections
should be carried out. Such arrangements ideally should be made
on a voluntary basis, and the Government will establish an Inspectorate
Forum in England, and an Audit and Inspection Forum in Wales which
will bring the key players together to address these issues.
110. The Government favours this voluntary approach.
But it also recognises that if voluntary arrangements are not
delivering a sufficiently effective inspection process, it needs
a reserve power to address any problems that might arise. Its
guidance powers under clause 24 are designed for this purpose;
like all other guidance powers in Part I of the Bill, the Secretary
of State will be obliged to consult with relevant parties on the
way in which the powers are exercised, as is provided for by clause
25. Clause 24 also provides the Secretary of State with an order-making
power to add further persons and bodies to those who are subject
to the guidance powers it sets out. This is a practical device
to ensure that if new statutory inspectorates are created with
a remit to inspect functions of best value authorities, then they
can be drawn into the collaborative process and subject to statutory
guidance where appropriate.
CLAUSE 25: GUIDANCE
111. Clause 25 sets out the Secretary of State's
guidance powers in respect of Part I of the Bill. One of the Government's
key policy objectives in framing this Bill is to avoid prescription
wherever possible and to afford best value authorities maximum
112. However, the Government also wishes to be
able to ensure that authorities approach key aspects of the best
value processsuch as carrying out of reviews, the production
of performance plans and the setting of performance targetsin
a manner which is broadly consistent, and which takes account
of best practice.
113. It is also important that the Secretary
of State is able to issue guidance to, or in respect of, best
value authorities generally reflecting the practical experience
of those authorities who have been acting as best value pilots
since April 1998. This experience is particularly valuable where,
for instance, they have sought to provide services to particular
groups in the community in a way which cuts across traditional
boundaries and includes other agencies in tackling related social
issues such as crime and disorder, drug awareness and youth employment.
114. In practice, it is likely that guidance
will be broadly similar for all types of best value authorities.
But where there are significant variations in functions, the guidance
will give recognition to them. County councils, for instance,
carry out different functions to districts; police authorities
carry out a significantly different range of functions to most
other best value authorities; and the unique nature of the GLA
may throw up specific issues which need to be addressed individually
within guidance designed for that purpose.
115. Clause 25 identifies and anticipates all
of these needs by allowing for the issue of guidance to best value
authorities generally at subparagraph 25(2)(a); for different
guidance to be issued to different authorities at subparagraph
25(2)(b); and for guidance to individual authorities, also at
116. Guidance issued under clause 25 will generally
be used to establish general principles, rather than to prescribe
rules. It will be used to ensure broad consistency in approach,
thus facilitating proper and meaningful comparisons, and thus
ensuring that all authorities are compared against each other
in a fair and non-discriminatory way.
117. The Government thus believes that the clause
serves the best interests of best value authorities, as well as
furthering its own policy aims. And in order to ensure that this
is the case, it has provided a further check on the use of guidance,
by committing the Secretary of State to a broad-ranging process
of consultation before guidance is issued, taking into account
the views of individual authorities and their representatives.
The Government believes that taking full account of the views
of best value authorities is the right approach to test the use
of powers which are primarily concerned with the way the policy
operates in the fieldin much the same way as, in other
parts of the Bill (for example, at clauses 15 and 18), it has
introduced Parliamentary scrutiny by means of the affirmative
resolution procedure for provisions which potentially affect the
operation of other legislation.
CLAUSE 26: COMMENCEMENT
118. Clause 26 provides, at subsection 26(1),
that sections 1-19 and 21-25 of the Bill will commence twelve
months after the Bill receives Royal Assent, unless an order makes
provision for earlier commencement. Subsections 26(2) and 26(3)
give the Secretary of State and the National Assembly power to
commence provisions earlier in respect of England and Wales respectively.
Subsection 26(4) allows for orders made under subsections 26(2)
or 26(3) to appoint different days for different purposes.
119. The approach to commencement in this clause
seeks to satisfy two broad policy aims. These are:
- to ensure that no vacuum develops between the
abolition of CCT and the introduction of the duty of best value,
whilst at the same time ensuring the National Assembly has discretion
over the date of introduction of the duty in Wales;
- to commence the provisions of the Bill in such
a way as to give best value authorities the maximum practical
help in, and opportunity to prepare for, compliance with the full
120. The Government is firmly committed to introducing
the duty of best value in England by 1 April 2000. The creation
of a maximum twelve-month interval between Royal Assent and the
coming into force of the Act means that the Government will be
able to ensure that the provisions of the Bill are brought into
force within a specified period.
121. The Government recognises that it will be
helpful to best value authorities to introduce some aspects of
the Bill much earlier than others. For instance, authorities preparing
local performance plans (under clause 6), planning best value
reviews (pursuant to clause 5), and making preparations to collect
relevant data about their performance (in pursuit of clause 4)
would find it easier to do so if statutory guidance and secondary
legislation on these topics were introduced by the Government
in sufficient time for authorities to react to them in the run-up
to 1 April 2000.
122. Conversely, there are some provisions in
the Bill, notably those imposing the general duty (at clause 3),
those creating new statutory duties for auditors and inspectors
(clauses 7-13), and those conferring intervention powers upon
the Secretary of State (clause 14) which it would probably not
be appropriate to impose before 1 April 2000.
123. Subsection 26(4) allows the Government to
take a clause-by-clause approach to commencement which takes account
of the contents of each clause and their purpose within the whole
Bill. Subsections 26(2) and 26(3) provide for separate consideration
of circumstances in England and Wales. Taken together, the order-making
powers in clause 26 are designed to facilitate a smooth transition
between the repeal of CCT and the application of the duty of best
CLAUSE 28: MODIFICATIONS FOR WALES
124. Under subsection 28(1), the National Assembly
for Wales will exercise the powers in Wales that in England will
be exercised by the Secretary of State; this provision excludes
Assembly Orders from Parliamentary procedures. Instead, the Assembly's
subordinate legislative procedures, set out in sections 64-68
of the Government of Wales Act 1998 and its Standing Orders, will
apply. The Committee has already considered these procedures in
its scrutiny of this Act during its passage through Parliament,
concluding that "the proposed mechanism for scrutiny, which,
save in cases of urgency, always requires both a costbenefit
appraisal and the affirmative procedure, is suitably rigorous".
(18th Report, 1997-98, column 14).
7 Modern Local Government:
In Touch with the People in England and Local Voices: Modernising
Local Government in Wales, both published in July 1998. Back