LA Spotlight

Our monthly LA View usually looks back on legal and regulatory events, news, cases and legislation in the previous month based around particular themes that accord with councils’ agenda. However, given the severity and urgency of COVID-19 that has overtaken the country (and worldwide) in recent days we simply want to send our best wishes to councils and your staff working for the good of your residents.

As a business our comprehensive business continuity plan has swung into action. With laptops; mobiles and secure access to all our files and systems we are able to fully work remotely away from the office.

If there is anything that the wider Bevan Brittan team can do to help you, please do not hesitate to contact us on our usual email and phone numbers.

• Commercialisation (contact Chris Harper);
• Place & Growth (contact Rebecca Pendlebury);
• Governance & Reorganisation (contact Judith Barnes);
• Contract Management (contact Richard Lane);
• Disputes & Regulatory Support (contact Olivia Carter or Judith Hopper); and
• Climate Emergency Response (contact David Hutton).

 

 

Commercialisation

2020 Budget offers opportunities for Research & Development

An encouraging shift in this year’s budget and a significant boast for capital infrastructure. How will this increase translate to local spend priorities and what will be the impact for innovation in public services?

The substantive measures for wide scale investment in transport infrastructure, homes, technology and environment are welcomed measures to support improvements in public services. However, it is the impact of these measures working together with a strong commitment to support research and development (receiving a commitment to increase investment to £22bn over the next five years) that presents particularly exciting opportunities for long term innovation. 

The announcement of the Public Works Loan Board review and the recent NAO report on commercial property also put the spotlight on property investment this month. At the same time as welcoming the cutting of  interest rates for investment in social housing by one percentage point and making available an extra £1.15bn of discounted loans for local infrastructure projects, we are await the outcome of PWLB consultation and the impact of this bringing greater stability to local authority led investment in commercial property. 

 

Publications & Guidance

Chancellor moves to limit commercial property investments
Local Government Chronicle | 11 Match 2020 (subscription required)
Councils will only be able to borrow once a year from the Public Loans Board to invest in commercial property for rental income, under government proposals for a new "lending framework".

Chancellor Rishi Sunak announced a review of the PWLB in today’s Budget alongside some targeted reductions in the cost of borrowing for social housing and infrastruture.

Budget 2020: Statement from Rob Whiteman on Treasury PWLB consultation
PublicFinance | 11 March 2020
CIPFA’s chief executive warns that government proposals to restrict council investment in commercial property could signal a more prescriptive approach. CIPFA has noted the proposed modification to PWLB borrowing requirements.  This represents one of the most significant interventions by government since the inception of the Prudential Framework in April 2004.CIPFA understands that the underlying rationale for the proposed measures is to first prioritise the use of PWLB for investment in services and local regeneration, and secondly the related aim to dampen the extent to which local authorities undertake borrowing to invest in commercial property purely for commercial gain by removing the PWLB as a borrowing route. That rationale is consistent with statutory guidance, the Prudential Code and is entirely consistent with CIPFA’s messaging on this matter.  Consequently, CIPFA welcomes these proposed changes to PWLB rules, whilst also expressing regret that the behaviour of some authorities has given rise to these changes which will affect all councils. 

Public Works Loan Board: Future lending terms consultation
HM Treasury 2020 | 11 March 2020
Local authorities invest billions of pounds of capital every year in their communities. The government supports this activity in part by offering low cost loans through the Public Works Loan Board (PWLB). However, in recent years a minority of councils have used this cheap finance to buy very significant amounts of commercial property for rental income, which reduces the availability of PWLB finance for core local authority activities. To address this the government is consulting on revising the terms of PWLB lending to ensure that local authorities continue to invest in housing, infrastructure, and public services. To further enable high-quality investment by local authorities, the government is cutting the interest rates for investment in social housing by one percentage point and making available an extra £1.15 billion of discounted loans for local infrastructure projects. Consultation closes: 4 June 2020

Joanna Killian: Why slash and burn wouldn’t work for Surrey
Local government Chronicle | 6 March 2020 (subscription required)
Surrey CC chief executive Joanna Killian explains how innovation, investment and ending introspection helped the county out of its financial hole.

Local authority investment in commercial property
National Audit Office | 13 February 2020
Some local authorities in England have invested significant public money in buying commercial property over the past three years with the aim of generating a financial return. Debt has increased for many of these authorities as a result, with a small group seeing significant increases in the amount they owe and the cost of repayment. The NAO estimates that authorities spent £6.6 billion on purchasing commercial property from 2016-17 to 2018-19 – 14.4 times more than in the preceding three years. Many authorities have borrowed to finance these purchases. The NAO estimates that between 38% and 91% of spending on these purchases across the sector was financed by borrowing in this period. Between 2016-17 and 2018-19 local authorities spent an estimated £3.1 billion on acquiring offices; £2.3 billion on retail property, including £759 million on shopping centres or units within them and £957 million on industrial property.

The report examines whether the framework overseen by the MHCLG allows for the management of risks to the financial sustainability of local authorities from investment in commercial property. We expect the Department to have clear objectives for the system and enough information and assurance on its functioning. We also expect the Department to make effective changes when required.

NAO’s full report and summary. Comment from Local Government Lawyer, Public Finance and Room 151 plus Local Government Association’s response.

 

News

The media should start to trust councils on commercialism
LocalGov | 17 February 2020
The National Audit Office has said that a large increase in spending by English local councils on commercial property over the past three years (up x14 on the previous three) has left them exposed to financial difficulties in an economic recession or property crash. This is undoubtedly true, especially given that much of the spending seems to have been financed through borrowing. But, as the Local Government Association’s Richard Watts pointed out, local authorities follow strict rules when undertaking these kinds of decisions with public money and, aside from trying to plug funding gaps, they are also attempting to boost their local economies, with retail centres high on their 'shopping-spree' list.

English councils went on property spending spree to offset cuts
Guardian | 13 February 2020
English councils went on a massive £6.6bn commercial property spending spree over the past three years, buying office buildings and shopping centres to offset the impact of government funding cuts, the public spending watchdog has revealed. The scale of the rush to acquire revenue-generating investments to fund council services has left many local authorities potentially badly exposed in the event of an economic recession or a property crash, the National Audit Office (NAO) said. Between 2016 and 2019, councils spent £3.1bn buying office developments, £2.3bn on retail property, including £759m on shopping centres, and nearly £1bn on industrial property – a 14-fold increase on the previous three years.

West Berkshire Council to 'reassess' property investments
BBC News | 12 February 2020
A council that borrowed £62m to buy property across England has pulled back from investing outside its district after guidance changes. West Berkshire Council bought nine sites as a commercial landlord to raise new income streams to pay for local authority services. But after the guidance was issued and borrowing rates increased, it has stopped investments nationwide. It said it was "re-assessing" its commercial property investment plans.

Shared service venture to create “finance academy” for managers
Room 151 | 11 February 2020
A back office shared services initiative run by three London councils is to create a “finance academy” to improve budget management and financial control. The move is being made as part of a major improvement plan agreed in July last year for the OneSource partnership, which covers ICT, asset management, human resources and finance across the London Boroughs of Havering, Bexley and Newham. A report to the council said the new academy would move the organisation to a model of continued professional development for all staff and improve finance support to council departments and members.

Private children's social care company debts putting children's care at risk - LGA warns
Local Government Association | 27 February 2020
Nearly three in four children’s homes and almost a third of fostering places are now provided by private organisations. Six of the 10 largest independent groups of providers of children’s residential and fostering placements had more debts and liabilities than tangible assets last year raising concerns about their viability. The LGA is concerned this is placing the stability of placements for children in care at risk, particularly as the private children’s social care providers offering the most homes for children increasingly operate using a private equity model which relies on large debt to drive growth. It is calling for greater national oversight of companies providing homes for children in care, like the role the Care Quality Commission (CQC) holds for adult social care provision.

Rising demand heaping pressure on children's social care
Local Government Association | 24 February 2020
Unprecedented demand and funding shortages have combined to put council children’s social care budgets under increasing pressure, the Local Government Association has revealed. New analysis by the LGA said these pressures have forced councils to overspend on children’s social care budgets to try and keep children safe by more than £3 billion in the past five years.

Children’s care overspends hit £3.2bn in five years
PublicFinance | 24 February 2020
Local authorities have overspent on children’s social care by £3.2bn in the last five years as the try to offset cuts from central government, analysis has found. A study by the Local Government Association found the number of children in England on a child protection plan has increased by 53% to 52,000 since 2009, while the number of children in care has shot up by 28% to 78,150.

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Place & Growth

Commercial property – the power to invest

On 13 February 2020 the National Audit Office released a report detailing local authority investment in commercial property. The report states that local authorities have invested £6.6bn in commercial property over the last three years (2016/2017 – 2018/2019). This appears, however, to be from a relatively small group of authorities.

The increase in commercial property investment is unsurprising following the substantial cuts in funding, and a need to offset funding reductions by generating new incomes through a range of strategies, including property investment. Buying commercial property not only generates income, it can also support regeneration. However, the scale of investment of public funds in this activity in the last three years, the concentration of this activity in a relatively small group of authorities, and the use of borrowing to finance such investments, is striking. The benefits from this investment therefore must be considered against the potential financial sustainability and value‑for‑money risks that have emerged.

The position set out in the report raises questions about the extent to which the Department and HMT can rely on the prudential framework in its present form to support value-for-money decision-making in the current legal and financial context. The permissive nature of the prudential framework has been tested by new behaviours in the sector, and the Department has not yet responded in a timely way that also reflects the marked variations in activity across the sector. To protect against risks to value for money, the Department must take steps to ensure that authorities’ actions are in line with the principles underlying the framework. To support this, it should strengthen framework oversight and develop methods for more timely, flexible and targeted intervention when required.

We have acted for a number of authorities acquiring commercial investment property and have provided specialist advice in respect of their power to invest and the need to have regard to MHCLG and CIPFA Guidance. If you would like advice or more information please contact: Judith.Barnes@bevanbrittan.com or Rebecca.Pendlebury@bevanbrittan.com

 

Legislation

The Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) Order 2019
In relation to England, the small business non-domestic rating multiplier is calculated in accordance with paragraph 3 of Schedule 7 to the Local Government Finance Act 1988 for each financial year when new rating lists are not being compiled. Item B in those calculations will be the retail prices index for September of the preceding financial year, unless the Treasury by order specify a lower amount. New rating lists are not being compiled for the financial year beginning on 1st April 2020 (“2020-21”). This Order specifies that for 2020-21 the amount for item B will be 288.7. The Order will only come into force if it is approved by resolution of the House of Commons before the House approves the local government finance report for 2020-21.

The Street and Road Works (Amendments Relating to Electronic Communications) (England) Regulations 2020
These Regulations make amendments relating to street works and works for road purposes. Amendments are made to support the implementation of Street Manager, a new digital service for planning, managing and communicating street and road works. Regulation 2 sets out which works this aspect of the Regulations applies to, and makes transitional provision. See also regulations 3(2)(a) and (c), (3) to (5) and (7), 4, 5(2), (3), (8) and (9), 6(2)(e), (8), and (9)).

 

Publications & Guidance

Government urged to 'think big' to tackle regional inequalities
LocalGov | 2 March 2020
A comprehensive review of economic decline and social division has called for a ‘large-scale, comprehensive, long-term and devolved’ plan of action to deliver change. The UK2070 Commission’s report found that regional inequalities in the UK continue to increase, with real growth in productivity being almost twice the average in London and nearly 50% of employment growth being in the south-east.

Flood infrastructure funding increased by only £3m over decade
LocalGov | 26 February 2020
Central Government funding for existing flood infrastructure has only increased by £3m over the last decade, according to a new analysis. The report, ‘A Climate Emergency: Flood Defences for the Future’, was carried out by the public sector procurement specialist Scape Group.

New measures to protect public spaces from terror attacks
LocalGov | 24 February 2020
Councils could be required to protect public spaces from terror attacks under new proposals announced by the Government. The new ‘Protect Duty’ law would require all owners and operators of public spaces and venues to take measures to prepare for and protect the public from a terrorist attack.

Liverpool city region set to back bus franchising
Transport Network | 20 February 2020
Liverpool City Region’s metro mayor has described franchising as the ‘leading option’ under plans to overhaul the region’s bus services. City region combined authority papers, published on Thursday (20th February), recommend a ‘detailed and independently audited assessment’ of the proposal.

Commons Library analysis of the Environment Bill 2019-20
House of Commons Library | 18 February 2020
The Bill sits alongside the Government’s longer-term objective for “this, to be the first generation to leave the environment in a better state than that in which we inherited it” and its manifesto pledge to “protect and restore our natural environment after leaving the EU”. The Bill covers two broad themes. Firstly, providing a new domestic framework for environmental governance. Secondly, making provision on specific environmental policy areas including waste, air quality, water, nature and biodiversity, and conservation covenants. The Bill contains 133 clauses and 19 schedules. Full report.

Why big cities are crucial to ‘levelling up’
Centre for Cities | 6 February 2020
The underperformance of big cities is at the heart of the North-South divide. If the Government is to ‘level up’ the economy then it needs to tackle this major economic problem. This report examines why, unlike many other developed economies, UK cities do not become more productive as they get bigger.

Local Housing Allowance freeze and homelessness
Local Government Association | 5 February 2020
New research for the LGA by Policy in Practice reveals the LHA rate now available for 9 out of 10 private renters across 279 local areas across the country is lower than their rent. This means that in many parts of the country there are no properties available to those entitled to full support with their housing costs.

The four-year freeze has left some families and vulnerable people – including single parents and disabled people – struggling to pay their rent and cover other household bills. In the worst cases, it is causing homelessness.

Independent review into council waste collections is published
Birmingham City Council | 3 February 2020
The findings of the first phase of an independent review into waste collection services are set to be endorsed by Birmingham City Council’s Cabinet on February 11. Conducted by Wood, a leading environmental consultancy, the review looked at all aspects of the service and was commissioned as part of the agreement which ended the industrial dispute that affected bin collections in early 2019. A series of recommendations, both short-term and long-term, are made in the review. As well as endorsing its findings and work to address them, Cabinet will also be asked to back the second stage of the process – a review of the system and frequency of bin collections, given it seems likely the new Government will require all councils to offer a weekly food waste collection service.

Environment Bill 2020
Department for Environment, Food & Rural Affairs | 30 January 2020
Documents related to the 2020 Environment Bill. The Bill will bring into UK law environmental protections and recovery.

Housing supply; net additional dwellings statistics: proposed changes to revisions policy
Ministry of Housing, Communities & Local Government | 30 January 2020
Housing supply; net additional dwellings statistics is the department’s main officially published measure of housing supply and currently no revisions to these figures are permitted after they have been published, except every 10 years at the time of the new census. We are proposing to change this policy to have more frequent annual revisions to this release which will improve the accuracy of previous years’ estimates of housing supply. Consultation closes: 26 March 2020

Consultation on equality objectives
Regulator of Social Housing | 30 January 2020
The Regulator of Social Housing has proposed three equality objectives which seek to strike an appropriate balance in meeting its general equality duty in its day to day work alongside a co-regulatory approach to regulation. Private registered providers, local authority registered providers, tenants, lenders and other interested stakeholders are invited to give feedback on whether they think the proposed objectives meet the RSH’s obligations under the Equality Act, and if appropriate activity has been identified to help achieve the overall objective. Consultation closes: 26 March 2020

 

News

LGA - £5bn national discounts threatening future of Right to Buy
Local Government Association | 4 March 2020
Tenants have received discounts of nearly £5bn to help purchase their council home under the Right to Buy (RTB) scheme since the size of the discount was increased in April 2012. The LGA said the scheme faces an uncertain future unless councils are given the flexibility to set discounts locally and retain 100 per cent of sales receipts to fund the replacement of homes sold off under the scheme. The national RTB discount currently averages 42 per cent of market value, meaning council properties can be bought for almost half price. Since the Government increased the size of the RTB discount in April 2012, the average discount on a property has increased by 137 per cent to more than £63,000. As a result, tenants have benefited from £4.9bn in Right to Buy discounts in order to buy their own home. With councils only able to use a third of each retained RTB receipt to build a replacement home, only a quarter (21,720) of these homes have been replaced. This loss of social rented housing risks pushing more families into the private rented sector, driving up housing benefit spending and rents and exacerbating homelessness.

North of Tyne mayor announces nearly £20m funding package to ‘boost’ business
LocalGov | 3 March 2020
The mayor of North of Tyne has announced a £19.75m funding package to support business growth and innovation. Mayor Jamie Driscoll said the money would boost rural economies, and bring new investment to Newcastle, Northumberland and North Tyneside. The money is part funded by the European Regional Development Fund (ERDF) and will unlock a further £20m in private investment.

Business rates appeal reforms have cut out ‘speculative’ challenges
PublicFinance | 27 February 2020
The Ministry of Housing, Communities and Local Government has said its initial research indicates that its 2017 reforms appear to have had a positive impact. In that year, MHCLG brought in a more comprehensive three-stage ‘Check, Challenge, Appeal’ process to tackle the issue of individuals challenging rate valuations without sufficient supporting evidence. According to an interim report on effectiveness of the reforms, 5,870 (61%) of 9,700 resolved challenges had resulted in agreement between the Valuation Office Agency and ratepayer. MHCLG said that the majority of challenges are now being submitted with relevant supporting evidence with only 7% of submitted challenges having been rejected as incomplete.

Housing backlog – more than a million homes with planning permission not yet built
Local Government Association | 20 February 2020
More than a million homes granted planning permission in the past decade have not yet been built, according to new analysis by the Local Government Association. It is calling on the Government to use its forthcoming planning white paper to give councils powers to take action on unbuilt land which has planning permission.

This includes making it easier to compulsory purchase land where homes remain unbuilt, and to be able to charge developers full council tax for every unbuilt development from the point that the original planning permission expires. With the right powers and funding, the LGA said councils can play a leading role in helping the Government tackle our national housing shortage.

Selling public land has created ‘minuscule’ amount of affordable housing, think tank says
LocalGov | 18 February 2020
The Government has sold enough public land for developers to build 131,000 homes, but only 2.6% of those homes will be for social rent, a think tank has revealed. The progressive think tank the New Economics Foundation (NEF) has warned that the selling off of public land has created a ‘minuscule’ amount of affordable housing.

Overhaul council tax and allow fiscal devolution, cities urge
PublicFinance | 11 February 2020
Major UK urban local authorities have urged the government to overhaul business rates and council tax systems as part of a move towards greater fiscal devolution. In a submission for next month’s Budget, the Core Cities UK and London Councils umbrella groups called for greater powers to raise cash locally to offset cuts and for the government to look at options such as tourist taxes.

PM confirms HS2 will go ahead alongside revolution in local transport
Department for Transport | 11 February 2020
Prime Minister Boris Johnson confirms HS2 will go ahead, alongside radical improvements to local transport networks across the country.

Major boost for bus services as PM outlines new vision for local transport
Department for Transport | 10 February 2020
Bus services across the country will be transformed with simpler fares, thousands of new buses, improved routes and higher frequencies. In a statement to Parliament, the PM will announce £5bn of new funding to overhaul bus and cycle links for every region outside London.

LGA responds to bus and cycling funding announcement
Local Government Association | 11 February 2020
Responding to the Government’s announcement of £5bn over the next five years to improve bus and cycling services in England, the LGA said: “We are pleased the Government has pledged a much-needed boost in funding for bus and cycling services. We look forward to seeing further details. Councils want to work with the Government to improve bus provision, which can be a lifeline to older and vulnerable residents and play a key role in tackling congestion and reducing greenhouse gases. It is essential that councils can use this new funding to protect services and reverse the reductions in local bus routes forced on local authorities from the £700m annual funding gap councils face in providing the concessionary fares scheme.”

London borough to use housing company to boost constrained HRA output
Room 151 | 6 February 2020
The London Borough of Barnet has set out proposals to boost its housing stock by channelling additional investment into a registered provider owned by its arm’s-length management organisation to complement Housing Revenue Account (HRA) funding. A report to members of the authority’s housing and growth committee said that despite 2018’s lifting of the borrowing cap that applied to the use of HRA funds to provide new homes, Barnet could only support the delivery of 658 new council homes via that route by 2025.

Combined authority re-defines ‘affordable housing’
LocalGov | 4 February 2020
The West Midlands has become the first region to re-define ‘affordable housing’. The West Midlands Combined Authority (WMCA) has introduced its own localised definition of affordable housing, linking the definition to the real world incomes of people in the area rather than to local house prices.

Cannock Chase reveals the risks in business rates appeals
Room 151 | 17 February 2020
Amazon’s victory in a business rates appeal means one Staffordshire council will have to dip into reserves. Richard Harbord discusses the trouble with appeals. The headlines about Cannock Chase District Council and the need to use its reserves to meet the outcome of a business rates appeal by Amazon, the world’s biggest retailer, underlines yet again that rateable values continue to be a major risk area for finance directors.

 

Cases

Pub owner loses appeal over liability order for Business Development District levy
Local Government Lawyer | 27 February 2020
In McGrath v London Borough of Camden [2020] EWHC 369 (Admin) Lord Justice Davis and Mr Justice Holgate rejected an application by a pub landlord that he was not liable to pay a levy for the Hampstead Village BID. James McGrath, then proprietor of the King William IV pub in Hampstead, appealed against the decision of District Judge Julia Newton at Highbury Magistrates' Court to impose a liability order for the £642 BID levy together with costs assessed at £6,264.25. The BID was set up in 2016 and for five years it can impose a levy of 1.5% of rateable value to pay for various amenities in the area concerned. Mr McGrath would be liable to pay the BID levy to the London Borough of Camden so long as a statutory demand notice was served.

Applicant wins Court of Appeal battle over whether difficulty finding legal advisers was “good reason” for delay in homelessness appeal
Local Government Lawyer | 31 January 2020
In Al Ahmed v London Borough of Tower Hamlets [2020] EWCA Civ 51, the Court of Appeal has overturned a High Court ruling that the fact a homeless applicant was unrepresented and seeking legal aid was not a “good reason” for delay in bringing an appeal under s.204 of the Housing Act 1996 against an adverse review decision under the homelessness provisions of that Act.

Court finds in favour of museum in ‘landmark’ business rates case
LocalGov | 17 January 2020
A long-running battle over how museums are valued for business rates has come to an end with a court ruling that they should be valued based on net income. In the case of Stephen G Hughes v Exeter City Council [2020] 7 (LC) the Upper Tribunal decided that the Royal Albert Memorial Museum in Exeter should not have been valued based on the cost of rebuilding, which is the Valuation Office Agency’s (VOA) preferred method.

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Governance & Reorganisation

A snapshot of standards in public life

It is now over 25 years since the Committee on Standards in Public Life (CSPL) was created as an independent advisory non-departmental public body, and much has changed in the local government sector since that time. In celebration of the milestone the CSPL commissioned and have now released a report providing a snapshot of standards in public life as of September 2019. We are however, still awaiting a response from the government in relation to the January 2019 report on local government ethical standards, and in the meantime the current regime continues to creak.

Most Councils will have agreed their budgets and set their council tax for the coming financial year, however this is increasingly becoming a very difficult and highly political process which can result in delay and risk around meeting the statutory deadline. We have been advising a number of councils about the issues that can arise in these situations, as well as practical ways to mitigate against them. Judith Barnes’ article on this topic remains as valid as ever.

Those who are interested in pensions might find the recent article by Philip Woolham of interest. The article discusses changes to legislation following a backlash in relation to exit payments.

 

Legislation

The Local Government (Structural Changes) (Further Financial Provisions and Amendment) (Amendment) Regulations 2020/124
These Regulations amend the Local Government (Structural Changes) (Further Financial Provisions and Amendment) Regulations 2009 so that the date specified for a general fund to be established is changed from 1st April 2019 to the date specified in the order made under section 7 of the Local Government and Public Involvement in Health Act 2007 as that on which the structural change comes into effect (“the reorganisation date”). These regulations come into force on 1 April 2020.

The Northamptonshire (Structural Changes) Order 2020/156
This Order provides for the establishment, on 1st April 2021, of a single tier of local government in Northamptonshire. Two new councils are created; the North Northamptonshire Council, for the same area as the existing districts of Corby, East Northamptonshire, Kettering and Wellingborough, and the West Northamptonshire Council, for the same area as the existing districts of Daventry, Northampton and South Northamptonshire. The County of Northamptonshire and the districts of Corby, East Northamptonshire, Kettering, Wellingborough, Daventry, Northampton and South Northamptonshire are abolished as local government areas with effect from 1st April 2021. The county council and district councils in the county are wound up. The new councils, to which elections are to be held in 2020, will operate as “shadow authorities” until 1st April 2021. Part 3 of the Order contains the arrangements for the shadow authorities, including their functions which are principally to prepare for the transition to a single tier of local government on 1st April 2021.

 

Publications & Guidance

The devolution parliament: Devolving power to England’s regions, towns and cities
IPPR North | 21 February 2020
Westminster government has enabled deep divisions to grow in the UK. London and the South East – home to just one-third of the England’s population – has accounted for almost half (47 per cent) of the country’s increase in jobs in the last decade. The UK is the most regionally unequal country in the developed world: inner London is one of the most productive areas in the whole of the EU, while, in other parts of the UK, productivity is similar to Poland, Hungary and Romania. This paper lays out a case for change that shows how the country could benefit from the right programme of devolution in England. Most major countries across Europe and the developed world have several centres of prosperity. As a result, they tend to have healthier, more resilient national economies with higher productivity and greater inclusion.

Councils call for long-term funding at Budget as new analysis reveals £19bn funding gap for local services
County Councils Network | 21 February 2020
The CCN’s new report, Local Government Funding Forecast Update 2020-25, reveals that local authorities face a funding shortfall of £19.1bn over the next five years, which equates to an annual funding gap for local authorities of £3.8bn. This huge funding gap persists despite the government providing councils with the ‘largest real-terms funding increase in a decade’ – and have called on the new Chancellor Rishi Sunak to commit to long-term funding of councils. Of the £19bn funding shortfall – an analysis which assumes councils will raise council tax each year until 2025 – the 36 authorities represented by the CCN account for £7.7bn of this funding gap, 41% of its total.

Artificial Intelligence and Public Standards: report
Committee on Standards in Public Life | 10 February 2020
The Committee on Standards in Public Life has today published its report and recommendations to ensure that high standards of conduct are upheld as technologically assisted decision making is adopted more widely across the public sector.

House of Commons Library Briefing Paper: Local Government Finance Settlement 2020-21
House of Commons Library | 10 February 2020
This briefing paper summarises and analyses the Local Government Finance Settlement for 2020-21. On 6 February 2020, the Government published the final Local Government Finance Settlement for 2020-21. This lays out the Government’s proposals for funding local authorities in England in the coming financial year through central grants and redistribution of business rates. The final settlement follows a technical consultation in September 2019, and a provisional settlement that was published on 20 December 2019. The policy proposals in the final settlement are largely unchanged from those in these earlier proposals

Final local government finance settlement 2020 to 2021: written statement
Ministry of Housing, Communities & Local Government | 6 February 2020
The Secretary of State for the Ministry of Housing, Communities and Local Government gives his written statement on the local government finance settlement 2020 to 2021.

Local government finance report 2020 to 2021
Ministry of Housing, Communities & Local Government | 6 February 2020
Local government finance settlement 2020 to 2021: local government finance report.

Council Tax referendum principles report 2020 to 2021
Ministry of Housing, Communities & Local Government | 6 February 2020
Report setting out the Council Tax referendum principles for 2020 to 2021.

LGA 2020 Budget submission
Local Government Association | 7 February 2020
This will be the Government’s first Budget following the General Election and the UK’s Exit for the European Union and is an opportunity for councils to play a key role in kick-starting the delivery of national domestic priorities and reforms. This submission calls for reform of Right to Buy, investment in technology to reshape services, more opportunities for councils to borrow for housing and infrastructure projects at favourable rates, empowering local areas in England, more power over local taxes, streamlining the appeals process and combat business rates avoidance. The 2020 Spending Review must provide sufficient funding and certainty for councils in the long term, including a long-term solution for funding adult social care.

LGIU MJ State of Local Government Finance Survey 2020
Local Government Information Unit | 5 February 2020
Key findings from the State of Local Government Finance Report include:

• Nearly all councils (97%) plan to increase council tax in 2020/21, with most (93%) planning to raise it by more than 1.5%
• Nearly all councils (97%) plan to increase fees and charges in 2020/21, with some being forced to raise them ‘by the maximum possible amount’ (14%)
• Confidence in the sustainability of local government finance remains very low, with three quarters (74%) of councils saying they do not feel confident
• 1 in 10 councils (12%) say they are in danger of being unable to fulfil statutory duties this year and 1 in 7 councils (14%) said they anticipate an increase in judicial challenges to the level of service provision this year
• Children’s Services & Education was the top immediate pressure, while Adult Social Care remains the top longterm pressure
• For over half of councils (59%), the Public Works Loan Board interest rate rise has forced them to alter their 2020/21 financial plans
• 77% lack confidence in 100% Business Rate Retention as a mechanism to fund local government. Nearly all councils (98%) say they are planning work to tackle climate change
• There was near universal disappointment in the Government’s progress delivering a sustainable funding system for local government (97%) and a long term social care strategy (98%)

 

News

Council warned of section 114 notice danger as reserves dry up
PublicFinance | 3 March 2020
Amber Valley Borough Council faces the prospect of a section 114 notice if it does not take action to redress its underlying budget deficit, its executive director of resources has warned councillors. This would mean the authority would not be able to make new spending commitments while the notice was being considered, effectively ending non-essential expenditure during the process.

Jenrick voices support for East Midlands Combined Authority plans
LocalGov | 2 March 2020
District and borough councils in Leicestershire have announced they will be taking forward discussions about creating an East Midlands Combined Authority after the Government welcomed the idea. The seven Leicestershire councils wrote to the secretary of state for Housing, Communities and Local Government, Robert Jenrick, in January in support of devolution and to make clear their willingness to work with the Government on its devolution framework.

Warwick District Council gives green light to council tax referendum
PublicFinance | 2 March 2020
Residents are to be given the chance to vote on a proposed 34.2% rise in Warwick District Council’s share of council tax. If approved, the increase would amount to an increase of £57 per year per household for a Band D property to £223, £52 of this increase will put into a £3m annual ‘ring-fenced’ Climate Action Fund with the remaining £5 going towards the Council’s other services.

Cornwall Council announces ‘ground-breaking’ joint leadership role
LocalGov | 25 February 2020
Cornwall Council has announced a joint agreement with NHS Kernow Clinical Commissioning Group as part of a new approach to working on social care, health commissioning and public health services. The new joint ‘Accountable Officer’ role will incorporate the duties currently undertaken by Cornwall Council’s Strategic Director of Adult Care and Health and those of NHS Kernow’s Chief Officer to provide joined-up leadership.

New councils agreed for Northampton town, Kingsthorpe and Far Cotton & Delapre
Northampton Chronicle | 25 Februray 2020
A new Northampton Town Council featuring 25 councillors is set to be formed in the next few weeks, as are new councils in Kingsthorpe and Far Cotton. Far Cotton & Delapre Community Council will feature 12 councillors, while the new Kingsthorpe Parish Council will have 15 councillors.

Councils face £19bn funding gap by 2025
LocalGov | 21 February 2020
Councils will face a funding shortfall of £19.1bn over the next five years despite planning council tax increases, new research has shown. Analysis by the County Councils Network (CCN) shows all the councils that have published their draft budgets so far are planning on raising council tax in April.

Final Northamptonshire budget set
Public Finance | 21 February 2020
Northamptonshire County Council has approved its final budget before reorganisation. It includes £23.2m savings from an estimated net revenue budget of £445.71m and a council tax hike of 3.99%. The council – which will be split into two unitaries at the end of the financial year – said reserves have been bolstered by an extra £2m, bringing the estimated total to £42m by March 2021.

Core Cities and London Councils call for greater freedoms for cities
Core Cities UK | 10 February 2020
Councils from the UK’s major cities and city regions have joined forces to call for radical devolution from Whitehall to enable them to ‘level up’ growth across the whole of the UK.  

‘Lancashire deal marks shift from PWLB borrowing’
Public Finance | 7 February 2020
A £250m-£300m bond agreed by Lancashire County Council is the beginning of a “big shift” away from borrowing via the PWLB, following a controversial 1% interest rate hike by the government, according to Luke Reeve, partner at EY. Reeve told PF he sees interest in the PWLB waning, because councils can now access private funding markets at cheaper rates and therefore have a “fiduciary responsibility” to do so. He added that councils cannot justify going via the PWLB purely because it is a simple and familiar method.

County warns of ‘predatory’ loan offers following PWLB rate rise
Room 151 | 5 February 2020
A county council has warned of “predatory” lenders circling the local government sector in the wake of the government’s decision to raise the Public Works Loan Board (PWLB) interest rate. The stark assessment came in Worcestershire County Council’s treasury management strategy which went before councillors at the authority last week. The council’s TMS outlines a strategy of external borrowing aimed at replenishing some of the reserves and cash balances which it has used to support capital borrowing since 2008.It said: “Other sources of borrowing [to the PWLB] will be considered. “However, some sections of the market have already responded to this rise in a predatory manner, with reheated versions of the controversial LOBOs and other debt products with opaque structures and features recently coming into the market, the council will tread carefully in considering other sources of borrowing.”

Northamptonshire set to underspend again despite children’s services pressures
Room 151 | 4 February
Northamptonshire County Council is on track to underspend on its 2019/20 budget, despite a predicted overspend of £7.5m on children’s services. In August, Room 151 reported that the authority faced a fresh financial crisis after a £34.9m medium term budget gap opened up, with the 2019/20 budget set for a £5.9m overspend. But the council’s third quarter revenue monitoring report, published this week, said that the council is now set to underspend by £29,000 against its approved budget of £417.7m.

Devolution and reorganisation in Cumbria: CCN responds
County Councils Network | 4 February 2020
The local government trade press and local media in Cumbria have reported that council leaders are in discussions with the government over a possible devolution and unitary model. The model put forward is to create two unitary councils in the county and a combined mayoral authority overseeing the large strategic services, media reports suggest. CCN’s response states this model is “fraught with risk and would incur a loss up to £7m over the first five years. This is in contrast with a single unitary council model, which could save up to £53m over the same timeframe in the area the size of Cumbria, while also delivering better services.”

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Contract Management

Coronavirus and commercial contracts

The outbreak of COVID-19 (coronavirus) is having a significant impact on organisations globally. The restrictions on travel, together with quarantine imposed on citizens, will inevitably disrupt contractual performance with a service provider or supplier’s employees and own supply chain being at risk.

As a provider or supplier, if you are no longer able to perform your existing contractual obligations you should carefully review your contracts to see whether there is a force majeure clause which may excuse you from liability for non-performance. Alternatively, as a commissioner of services or supplies, if your provider or supplier is attempting to declare force majeure or frustration of your contract, you will need to consider what remedies are available to you and whether you can enforce or terminate the contract.

Force Majeure Event

If your contract contains a force majeure clause you will need to assess whether the outbreak of coronavirus would fall within the protection offered by the relevant clause. Generally, force majeure events are unexpected circumstances outside of a contracting party’s reasonable control which prevents it from performing its contractual obligations.

If your contract does not contain a force majeure clause and your contract becomes impossible (or illegal) to perform as a consequence of coronavirus, it may be open for you to argue that the contract has been frustrated.

However, organisations should be aware of the risk mistakenly asserting force majeure or frustration as this could amount to a breach (or anticipatory breach) of the contract, which depending on the severity of that breach could entitle the aggrieved counterparty to claim damages or terminate the contract.

Local authorities should not underestimate the disruption that the outbreak could cause and, if you have not already done so, you should consider appropriate risk management measures for your organisation.

If you would like advice on risk management measures for your organisation or advice on the terms of existing contracts and the protection available for your organisation, or advice on entering into new contracts during this period, please get in touch.

 

Publications & Guidance

Carillion: two years on
Institute for Government | 3 March 2020
The government has yet to address the problems that led to the collapse of Carillion two years ago – this report warns that the Johnson government risks ‘another Carillion’ if it doesn’t get behind the reforms put forward after the firm’s liquidation. The report calls on the government to:

• Name a Cabinet Office minister who is responsible for improvements in outsourcing.
• Use this summer’s spending review to give the Cabinet Office funding to support and scrutinise contracting by departments.
• Extend contracting training to local government, the NHS, and other public bodies.
• Equip the new Audit, Reporting and Governance Authority with the statutory powers recommended by the Kingman review, including to force changes in company accounts rather than applying to court to do so.

Buying for schools
Department for Education | 2 February 2020
Advice on buying goods and services for your school. Following these guides will help schools to get value for money and comply with EU procurement law.

 

News

Is outsourcing falling out of favour with local government?
Public Finance | 11 February 2020
After the collapse of private contractor Carillion and the failure of outsourced probation, is outsourcing out of vogue with local government? Neil Merrick reports. Towards the end of last year, private contractor Interserve won more than £20m of public sector work – less than 12 months after it went into administration. The company is being paid £13.9m to refurbish Roseberry Park Hospital in Middlesbrough and £7.2m to build an extension at Colmers Sixth Form College in Birmingham. Bailed out by lenders, it now operates as Interserve Group Ltd. It is keen to attract more public sector work on top of the probation and other contracts it held when it ran into trouble during 2018. Carillion, meanwhile, is no more. After the company was forced into liquidation at the start of 2018, its construction and other contracts were mostly taken over by other firms. So, what are the prospects of outsourcing at the start of the 2020s? Are councils and other public sector bodies still inclined to award contracts to the private sector, or is there a stronger thirst for providing services inhouse?

 

Cases

Informatikgesellschaft für Software-Entwicklung mbH v Stadt Köln
The boundaries of ‘horizontal’ co-operation between contracting authorities have been clarified in a recent opinion from Advocate General Campos Sanchez-Bordona. Such horizontal arrangements need only comply with the conditions contained in Article 12(4) of Directive 2014/24/EU so as not to constitute ‘public contracts’ governed by the public procurement rules.

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Disputes

Vicarious Liability on the move

A new Court of Appeal decision has considered whether London Borough of Haringey is vicariously liable for continuing sexual abuse of a pupil by a teacher, after the pupil had left school.

In the case of London Borough of Haringey v FZO, the Claimant sought compensation for psychiatric injury, which he attributed to sexual abuse by his school teacher. The abuse began whilst he was at school between 1980 (when he was 13) and 1982. The local authority appealed against the decision that it was vicariously liable for the continued abuse occurring after the Claimant had left school.

The claim was issued 25 years after the limitation period for the final assault had expired. The Court of Appeal upheld the Trial Judge’s decision to disapply the limitation period because insufficient prejudice was caused to the authority by the delay, despite its significant length. The teacher had already pleaded guilty to various counts of sexual assault in the Crown Court, and although the delay meant that some medical and educational records were missing, this did not impair the psychiatric experts’ opinions or the Trial Judge’s conclusions.

The Court found that the Claimant had not consented to sexual activity which occurred after he reached the age of consent. The ongoing activity was a continuation of his submission to abuse, not consent. The submission was a result of the psychological coercion which had begun during the Claimant's education at school.

The Court considered the two-stage test for vicarious liability, arising from the Supreme Court decisions in Various Claimants v Catholic Child Welfare Society and others [2012] and Mohammed v WM Morrison Supermarkets plc [2016]: 

• the teacher was employed by the local authority throughout the relevant period - which all parties agreed satisfied the first stage of the test, namely whether the relationship between the teacher and the Authority could give rise to vicarious liability.
• the second stage examined whether there was a sufficient connection between the employed position and the wrongful conduct to make it right for the employer to be held liable, and involves consideration of the principles of social justice. Ongoing control of the Claimant after he had left school was causatively linked to the ongoing, continuous and non-consensual sexual activity. The Local Authority continued to be vicariously liable.

Lord Justice McCombe identified that the law of vicarious liability has been ‘on the move’ and is no longer limited to ‘the narrow concept’ of an employer only being liable for actions occurring during the course of the employee’s employment. The fact that the acts in issue might have been committed away from the workplace, or outside of the employee’s hours of duty, appears less relevant today, particularly in cases of abuse of trust.

This case involved liability for abuse of the pastoral relationship between teacher and pupil and is of particular concern for local authorities. However there are potential ramifications for any organisation with employees in a position of trust, such as in the social and healthcare setting. Such organisations can be vicariously liable to the injured party for ongoing abuse by an employee, during a period after the relationship of trust has ended.

 

Publications & Guidance

Ombudsman reminds councils about care home top-up fees
Local government & Social Care Ombudsman | 12 February 2020
Councils across England are being reminded by the Local Government and Social Care Ombudsman of their duties under the Care Act to administer ‘top-up fees’ for people contributing towards relatives’ care.

The warning comes after two councils – Dudley Metropolitan Borough Council, and Lincolnshire County Council – disputed some of the Ombudsman’s recommendations against them.

 

News

Legal challenge by council to new road scheme in Bedfordshire
Luton Council | 17 February 2020
Luton Council’s executive have agreed to legal proceedings regarding a major road scheme planning application in Bedfordshire. The planning application, is for a new 2.75 mile single and dual carriageway road linking the M1 and the A6 between the M1 Junction 11a and the A6 Barton Road. Luton Council is now proceeding with a judicial review (JR) against Central Bedfordshire Council, submitting a claim against their decision to approve the application. The key reason for pursuing a JR is to delay a decision so that the Local Plan inspectors can view the scheme and make sure Central Bedfordshire Council has fully considered the potential impact of the proposed development on Luton residents and businesses.

Whitehaven coal mine approval to be reviewed by judge
BBC News | 7 February 2020
The lawfulness of a decision to allow Cumbria's first deep coal mine in 30 years is to be considered by a judge. Campaign group Keep Cumbrian Coal in the Hole (KCCH) has been granted permission for a judicial review of Cumbria County Council's approval. The group is challenging permission for a coking coal mine at St Bees and a processing plant on the former Marchon chemical works site in Whitehaven. The county council said it could not comment while the review was pending. West Cumbria Mining, which submitted the plans, also declined to comment. The authority's development control and regulation committee voted unanimously to give the site planning permission in March last year. The decision was ratified in October despite the authority being warned it had failed to consider the greenhouse gas emissions of the mining operations, solicitors for the campaigners said.

 

Cases

Judge dismisses case brought over ownership of village hall, makes restraint order
Local Government Lawyer | 13 February 2020
A judge has dismissed a case brought over the ownership of a village hall as totally without merit and issued an order restraining one litigant from bringing further actions. The lengthy dispute concerned the village hall in Denchworth, Oxfordshire, which has been the subject of two refusals of judicial review and one rejection by the Court of Appeal. In Panton & Anor v Vale of White Horse District Council & Anor [2020] EWHC 167 Ashley Greenbank, sitting as a deputy judge of the High Court, ruled: “In my view, the claim was totally without merit and I will certify the order accordingly.”

District council defeats judicial review challenge over acceptance of report on neighbourhood plan
Local Government Lawyer | 11 February 2020
A development venture has lost a judicial review challenge over a district council’s decision to accept the report of an examiner into a neighbourhood plan. The examiner had recommended that the Hook Neighbourhood Plan for 2018 to 2032 should be modified, and then put to a referendum. Hart District Council accepted those recommendations on 28 August 2019. The referendum took place in October 2019 and the neighbourhood voted in favour of the plan, which had been prepared by Hook Parish Council. However, the claimant, Wilbur Developments, launched a legal challenge and the council agreed not to make the neighbourhood plan until the claim had been determined. Wilbur Developments Ltd, R (On the Application Of) v Hart District Council [2020] EWHC 227 (Admin) (11 February 2020)

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Climate Emergency Response

Publications

UK–EU future relationship: UK and EU mandates
Institute for Government | 27 February 2020
On 25 February 2020, the EU published its mandate for negotiations with the UK on the future relationship. The UK government published its mandate two days later, on 27 February. Negotiations will formally begin on 2 March. This explainer compares the mandates and sets out what they mean for the negotiations. 

The UK's points-based immigration system: policy statement
Home Office | 19 February 2020
This policy statement sets out the government's plans for a new UK points-based immigration system. It includes information on:

• the scope of the points-based system
• salary and skills thresholds for skilled workers
• a route for highly-skilled workers
• reducing the overall number of lower-skilled workers
• the visa process
• crossing the UK border
• engagement and outreach
• Migration Advisory Committee analysis of a points-based system

Brexit next steps: The Court of Justice of the EU and the UK
House of Commons Library | 7 February 2020
This Insight explains what role the CJEU will play in the UK during the transition period and beyond.

The Future Relationship between the UK and the EU
Prime Minister’s Office | 3 February 2020
This statement sets out the Government’s proposed approach to the negotiations with the EU about our future relationship.

Brexit next steps: The transition period
House of Commons Library | 31 January 2020
Insight article examining the changes coming into force with the Withdrawal Agreement.

 

News

LGA responds to Government UK borders announcement
Local government Association | 11 February 2020
Responding to the Government’s announcement that EU imports and exports will face the same checks as the rest of the world after the transition period ends, Cllr Kevin Bentley, Chairman of the LGA’s Brexit Taskforce, said: “As port health authorities some councils are legally responsible for undertaking checks of certain imports, including live animals, as they enter the country.  Currently, products arriving from Europe do not receive the same checks as imports from the rest of the world. Introducing equivalent checks for imports arriving from Europe will have a significant impact on the number of checks required and on the way these services operate. The Government should urgently consult with councils on the likely impact on transport infrastructure.” 

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