Practical and Legal Guidance for Assessing Capacity
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October - November 2018 #1
Welcome to our new look Local Authority View.
Local Authority View (previously Authority Update) is designed to support and inform in-house lawyers with the latest news and updates on the issues facing local government during challenging times.
To reflect the issues facing local government, Local Authority View is structured into five main themes. You will now find the news, policy announcements and cases set out under the headings of:
In each issue of Local Authority View we will place the spotlight on a comment or article regarding a theme that we believe is worthy of further discussion.
This month we wanted to focus comments made at the recent SOLACE Summit, and the accompanying paper supported by the MJ Annual Survey 2018 ‘A Call to Action’.
The issues raised are the drivers for much of the work we are advising local government on. As such, the context sits at the heart of the work being undertaken by local government and is illustrative of the challenges ahead. Providing advice in context remains essential for us all.
The Call to Action emphasises three long-term policy goals, with which we are familiar:
SOLACE has set out a 10 point plan for stabilising local services. We endorse these ideas and would like to draw your attention to the following areas:
Greater freedom to capitalise
The demands on service provision are intense, and costs continue to escalate. Among the challenges is the need to find resources for new ways of delivering services, including funding for intervention and prevention services that may have long-term benefits. There are numerous other opportunities to capitalise.
Support councils to be more commercial
With 97% of councils looking at ways of generating more income, we are familiar with the powers, models and solutions across service types. Developing robust business cases is critical in this process to minimise risks and understand the market and competition in an area, whilst recognising the risk of failure.
Modernise local services
There are a number of major issues facing the sector. Beyond Brexit there is climate change and the impact of digital revolution, and Artificial Intelligence. The suggested SOLACE plan is more specific to the use of digital to support service delivery and interface with residents, but more opportunities exist now about the use of assets for digital growth and income generation. We will revisit these opportunities in future editions.
We trust you enjoy the first edition of Local Authority View.
Whilst the Autumn Budget statement makes a start to plough funds into stretched frontline public services affecting those most vulnerable communities, there is much to be done on the road out of austerity. Given the uncertainties over Brexit, there are unlikely to be any significant changes on the local authority approach to commercialisation. But this agenda continues to provide much needed support in the battle to protect public services.
This is not to say that the current drive towards income generation and trading activities does not remain subject to close scrutiny, both from within local democratic process and also from central government, as the warning issued by the Ministry of Housing, Communities and Local Government (MHCLG) at the recent SOLACE Summit highlighted.
We continue to support local authorities nationally collaborating with each other to establish strategic partnerships, striving for more innovation in commissioning and outsourcing of services. Learning from the lessons of first generation shared services arrangements, such as the three boroughs, is imperative in ensuring the success of future collaborations.
In the aftermath of Carillion, changes lie ahead for public private partnership collaboration. This does not just relate to infrastructure development. The health and social care dilemma remains to be solved, as pressure on adult social care and children’s social care continues to mount. Therefore we need to ask the question “what is the future of commissioning and what options exist?”
So where does the Budget leave the future of private sector investment? Having been market shapers of the PFI and PPP initiatives, we continue to advise on all aspects of the management operational contracts and investment schemes (see Contract Management).
Publications & Guidance
Funding and provision of local authorities’ children’s services inquiry
The MHCLG Committee has launched a new inquiry into funding and provision of local authorities’ children’s services. The inquiry will investigate what impact public spending has had on the provision of care services, and the approaches local authorities have taken in addressing funding constraints. Deadline for written submissions is Tuesday 18 December 2018 and should be made via the written submission form.
Making significant changes ‘prescribed alterations’ to maintained schools
The DfE has published updated statutory guidance on making "prescribed alterations" (e.g. expansion) to maintained schools.
Council purchases retail park as investment to protect frontline services continues
Croydon Council has completed the purchase of another freehold site in the borough to provide additional income for frontline services. The council has purchased the Colonnades Retail and Leisure Park on the Purley Way. The purchase is in two phases; the first will be for nine existing units and the second, anticipated in May 2019, when three additional units are completed and are generating income. The initial sale will include an obligation for the council to purchase the second phase of the estate development.
A combined purchase price of £53m has been agreed. Additional income-generating opportunities have been identified that could further enhance the value of the asset. It is anticipated the purchase will provide an annual income of around £1.4m, net of interest and other costs. This will help to protect local services for residents. It is the first purchase since a £100m fund was approved as part of the Asset Investment Strategy signed off by the council last month.
Spending by Local Authorities on trading services increases significantly
The latest statistical release from the MHCLG shows the amount rose from £323m in 2014/15 to £2.9bn in 2017/18. These figures represent a significant increase over the last four years.
SOLACE Summit: Commercialisation crackdown warning
A senior civil servant has warned councils the Government could crack down if commercialisation trends continue. The warning from permanent secretary at the Ministry of Housing, Communities and Local Government (MHCLG), Melanie Dawes, came after spending by English councils on trading services ‘increased significantly’ from £323m in 2014/15 to £2.9bn in 2017/18.
CIPFA warns councils on borrowing to invest in commercial property
In a statement from Rob Whiteman and Richard Paver, CIPFA has expressed concerns about the practice of borrowing to invest in commercial property.
Council considers bidding for new money raising powers
Councillors at Bath & North East Somerset are being urged to lobby the Government for new powers to raise money for local services, such as introducing levies on tourism and short-term lets.
Reform outsourcing to avoid £30bn bill, think-tank warns
Bringing outsourced services in-house would cost local government £30bn, a think-tank has calculated.
The Ethical Commercialism report published by Localis today warns that councils would pick-up the bill in the event of a collapse of the outsourcing sector.
Sweating the assets
Public sector property chiefs recently met at their annual conference to discuss how to generate revenue from their assets at a time of income reduction. With property and revenue generation high up on the local authority agenda, the recent annual conference for UK public sector property heads in Downing College, Cambridge took place at a crucial time, just before the Autumn Budget and next year’s local government settlement.
Trio kill off shared IT service
A shared IT service between three London boroughs has collapsed. Camden, Haringey and Islington LBCs have had the service since 2016 and last July agreed a revised ‘lite’ model with shared infrastructure, investment and savings but without management by a joint committee. But now all three partners will re-establish separate services from 1 January 2019.
Report calls for 'reset' of Public Private Partnerships
Launched yesterday by the specialist regeneration developer U+I, the report calls for a ‘reset’ of our understanding of Public Private Partnerships in the wake of the Carillon collapse and the failure of the Haringey Development Vehicle (HDV).
District considers giving chief exec authority to approve investments up to £5m
The Cabinet at Hambleton District Council is to consider giving its chief executive delegated authority – in consultation with the Leader – to approve investments up to £5m, subject to certain safeguards.
UK cities have 'more than recovered', says latest index
Improving skills levels and new business formation have been the key long-term drivers of city growth since the financial crisis, according to analysts.
Virgin Care awarded contract to deliver Lancashire health services
Virgin Care has been identified as the preferred bidder for the delivery of 0-19 public health services in Lancashire after a legal challenge forced a re-evaluation of the bid.
The scale of cuts faced by local government, the changes the sector has implemented as a result of those cuts, and the challenges still faced, should not be underestimated. However, a number of authorities have sought an opportunity to invest in place, in order to promote growth.
A fundamental aspect of this is likely to be driving increased revenue from business rates – making the area attractive to business and bringing investment, which will in turn will ensure that the area is attractive to individuals to live, work and socialise. Key to this will be recognition of the changing face of the high street. When launching the new plan to unlock ‘funding, expertise and support’ in order to revive high streets across the West Midlands, the Mayor of the West Midlands, Andy Street, commented that: ‘The future of the high street will not only be about shops, it will be about public services, homes, small businesses and community activities’. There is also an on-going government consultation on a package of measures to provide greater planning certainty to support the high street, by allowing it to adapt and diversify and ensure the delivery of new homes, in the right places and without delay. This consultation will close on 14 January 2019, so there is still time to input into policy in this area.
In order for a place to be attractive it must contain decent housing. Therefore, the news last month that the government intends to lift the Housing Revenue Account (HRA) borrowing cap has been gratefully received. When announcing the policy, Theresa May said that “Solving the housing crisis is the biggest domestic policy challenge of our generation. It doesn’t make sense to stop councils from playing their part in solving it.” Early indications have suggested removal of the cap could lead to the building of over 100,000 homes per year. Some believe this figure is optimistic given we don’t yet have the small print. But whatever the final detail, there is clearly a reason for optimism.
Supreme Court to hear key case on village greens and public authority land
The Supreme Court has agreed to hear conjoined cases over village greens, public authority-owned land and the concept of ‘statutory incompatibility’, it has been reported. In the first case, the Court of Appeal dismissed an appeal by Lancashire County Council, over the registering of land near a primary school as a village green. In the second case, the Court of Appeal allowed an appeal against a judicial review challenge brought by NHS Property Services over the decision of Surrey County Council to register land near Leatherhead Hospital as a village green.
Council defeats High Court challenge over adoption of policies in Local Plan
A legal challenge to Waverley Borough Council’s adoption of certain policies in its Local Plan has been rejected. The case of CPRE Surrey & Anor v Waverley Borough Council & Ors  EWHC 2969 involved three closely linked claims concerning the same site at Dunsfold Aerodrome.
No second successions rule under HA 1985 not discriminatory
In London Borough of Haringey v Simawi and another  EWHC 2733 (QB) (19 October 2018), the defendant challenged the London Borough of Haringey's claim for possession of a property that he occupied, where his deceased mother had been a successor secure tenant. He argued that the rule preventing second successions in sections 87 to 88 of the Housing Act 1985 (HA 1985) was incompatible with his rights under Articles 8 (right to respect for private and family life) and 14 (protection from discrimination) of the European Convention on Human Rights (ECHR). This case adds clarification around second succession claims.
Publications & Guidance
New planning rules "to boost build out rate for large sites”
A new set of planning rules should be produced for sites with more than 1,500 homes to speed up property building, a major review has said. Sir Oliver Letwin’s report said new rules would require developers to build a wider range of properties with different designs and tenures, to speed up build out rates. He calls for a range of recommendations including councils to be given a more muscular role in guiding major homebuilding projects and the power to purchase undeveloped land for 10 times its existing use value; this would make it viable for more affordable housing to be built.
Consultation outcome: Supporting housing delivery through developer contributions
A summary of consultation responses and the Government’s view on the way forward.
Government welcomes Homes England's new 5 year strategic plan
Communities Secretary Rt Hon James Brokenshire MP welcomed Homes England’s Strategic Plan. Since its launch in January, Homes England’s remit is to adopt a more commercial approach to acquiring, preparing, managing and developing land in areas of high demand.
Changes to planning policy and guidance including the standard method for assessing local housing need
This consultation seeks views on changes to planning practice guidance on the standard method for assessing local housing need. Consultation closes on Friday 7 December 2018.
Funding released to make social sector homes safe
MHCLG announced 12 councils and 31 housing associations will receive funding for the removal and replacement of unsafe aluminium composite material (ACM) cladding from 135 buildings. £248m has been released to social sector landlords to fund the removal and replacement of unsafe cladding from high-rise (defined as 18 metres or higher) social sector homes. The money is the first tranche of funding released from the estimated £400m announced by the Prime Minister earlier this year.
Improving access to social housing for victims of domestic abuse
Statutory guidance for local authorities to improve access to social housing for victims of domestic abuse in refuges or other types of temporary accommodation.
Housing and disabled people: what should local authorities do?
The EHRC has published a toolkit for local authorities on their responsibilities towards disabled people.
Homelessness code of guidance updated
Guidance on how local authorities should exercise their homelessness functions in accordance with the Homelessness Reduction Act 2017 from 3 April 2018. Local housing and social services authorities must have regard to this guidance when exercising their functions relating to people who are homeless or at risk of homelessness.
Tax rules for second-homes to be reviewed by ministers
A business rates ‘loophole’ which could be costing English councils millions in lost Council Tax is to be reviewed by ministers. The consultation will seek views on whether the current criteria should be strengthened to ensure second home owners are contributing to the local economy through the proper payment of council tax, or, for those genuinely renting out their property and supporting tourism, business rates.
Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Act 2018 receives Royal Assent
This Act received Royal Assent on 1 November 2018 and will come into force on a date to be appointed. It implements two policy commitments which were made in the November 2017 Budget. Firstly, reversing the effects of the ‘staircase tax’ (the colloquial term given to the effects of the case of Woolway vs Mazars, on which judgment was given in July 2015. This case affected the valuation of properties for business rates purposes). Secondly, increasing the maximum ‘empty homes premium’.
Third neighbourhood development order in Northamptonshire
Kettering Borough Council has approved the third NDO in England, the Broughton NDO.
Councils sitting on £443m of infrastructure funds
Local authorities in England and Wales are sitting on £443m that should be invested in local infrastructure, a freedom of information request has revealed.
FOIs sent out by the Association for Consultancy and Engineering (ACE) show that two fifths (40%) of the receipts from a levy on property developers meant for local infrastructure improvements remains unspent by councils. The research also shows that across the board, take-up of the levy remains poor, with only 43% of councils in England and Wales (148 out of 348) choosing to implement it.
Housing association model of delivering social housing ‘not working’
The policy of relying on housing associations rather than councils to deliver social housing is ‘not working’, procurement specialist says. A study by the public sector procurement specialist Scape Group has found the average council in England would like to build 1,800 homes for social rent every year but only expect to build up to 1,000 homes over the next decade.
The local government reorganisation bandwagon continues apace, with further announcements made by the Secretary of State, and an increasing number of Councils considering whether to hop on-board:
On 1 November 2018 the MHCLG Secretary, James Brokenshire announced that Buckinghamshire's five Councils are to be replaced with a single county-wide unitary (subject to Parliamentary approval). In the same statement, he reminded authorities that the sunset clause in the Cities and Local Government Devolution Act 2016 will fall away at the end of March 2019. This will mean that any subsequent reorganisation under that Act will require the consent of all authorities involved. It will however, still be open to the Secretary of State to invite proposals for reorganisation and to consult upon them before making a decision under the Local Government and Public Involvement in Health Act 2007.
On 15 November 2018, Cumbria County Council considered reorganisation proposals which resulted in an agreement to enter into talks with the MHCLG, to explore the possibility of replacing seven authorities with either one or two unitary Councils.
Reorganisation of Dorset's nine existing Councils into two unitaries is progressing with the appointment by Dorset Council's shadow senior appointments committee of Matt Prosser as Chief Executive.
Further details have now been published in relation to the devolution for the North of Tyne Combined Authority. The deal intends to bring £600m investment funding over 30 years, powers over matters including housing and skills, as well as the leadership and accountability of an elected mayor.
Publications & Guidance
North of Tyne Combined Authority devolution deal
Devolution deal to bring powers, funding and an elected mayor to the North of Tyne Combined Authority (Newcastle, North Tyneside and Northumberland). Following the establishment of the North of Tyne Combined Authority, this devolution agreement is confirmed. It will bring £600m investment funding over 30 years, powers over matters including housing and skills, as well as the leadership and accountability of an elected mayor. This document spells out the terms of the agreement between government and the North of Tyne Combined Authority, including the scope and terms of the devolved powers and funding, and the respective powers of the Combined Authority and Elected Mayor.
Local Government (Boundary Changes) Regulations 2018 (SI 2018/1128)
These regulations make provisions which provides for the winding up of two or more district councils (predecessor councils) and their replacement by a single district council (successor council). Made on 31 October 2018 and coming into force on 26 November 2018.
Section 10 of the Local Government and Public Involvement in Health Act 2007 (LGPIHA 2007) enables the making of boundary changes in relation to local authorities including the abolition of existing local government areas and their councils and their replacement with new local government areas and councils. Section 14 of the LGPIHA 2007 provides for regulations to make provision of general application for the purposes of orders under section 10. The LGBCR 2018 make such provision in relation to a section 10 order which provides for the winding up of two or more district councils (predecessor councils) and their replacement by a single district council (successor council). These Regulations provide for the transfer of all the functions of and all property, rights and liabilities of the predecessor councils to the successor council and for continuity as a result of the transfer.
Cumbria council prepares to vote on unitary reorganisation proposals
Cumbria County Council has submitted proposals for moving to a unitary system which will go before the council on 15 November 2018 (Agenda item 11). Cumbria CC members will be asked to vote on a local government reorganisation which would see the county council and six district councils combine its responsibilities. Analysis by auditors EY calculated that the reorganisation could make direct annual savings of up to £24.6m, with further savings to be made through transforming services shared between the councils.
Greater Manchester’s transport system ‘outdated’, Burnham says
Mayor Andy Burnham has called on the Government to devolve more power to Greater Manchester so that it could control the day-to-day running of its transport system, as is the case in London.
Revealed: the areas embroiled in a LEP boundary tug of war
In July 2018 the Government published "Strengthened Local Enterprise Partnerships" with two main objectives:
Strengthened Local Enterprise Partnerships also aspires to the Board of a LEP consisting of two thirds private sector directors.
The battlegrounds over local enterprise partnership boundaries have been uncovered by LGC research.
Nineteen of the 38 LEPs have either proactively suggested boundary changes or become unwittingly involved in arguments over their membership. There are currently 14 areas where two LEPs overlap.
Communities Secretary warns councils ahead of change to process on reorganisations
The Communities Secretary has warned councils that from March 2019 the current consent provisions used for local government reorganisations would fall away.
Single unitary council for Bucks gets the go-ahead
Buckinghamshire’s five councils are to be scrapped in favour of a single county-wide unitary, MHCLG Secretary James Brokenshire has announced. The five councils: Aylesbury Vale, Chiltern, South Bucks and Wycombe, will cease to exist on 1 April 2020, with elections in May of that year, assuming Parliament approves the plans.
The role of the private sector in public service delivery has come under scrutiny following a number of high-profile failings, including the collapse of Carillion, Capita’s profit warnings and the imminent collapse of Allied Healthcare.
Regardless of the outcome of the debate on the role of the private sector, whether there is a business as usual increase in spend on outsourcing, or a move to bring more services in-house, it is clear that there is a need for change in the approach to public sector contracting. Any change should enable procurement and contract flexibility, and reviewing how risk is shared, mitigated and managed. This was a key theme of the recent SOLACE Summit, which asked what we should do about the increasingly hopeless legacy contracts.
Earlier this month the Government responded to the Public Administration and Constitutional Affairs Committee’s report on public sector outsourcing and contracting after Carillion. Key points in the government’s response included:
We have been supporting authorities with their long-term commitments under existing contracts, looking at how to generate savings and value through delivery. As well as responding to urgent issues to keep services going, we have been supporting on overall contract management through enforcement of contractual remedies and negotiating the restructure of services.
Focusing on contract management at this stage cannot only help improve service delivery, but also ensure that you have all your ducks in a row when it comes to exit - whether through expiry or termination, or in response to an emergency. This also includes looking at options to build on contractual procedures for termination through living wills. With more private sector providers hitting the headlines following significant financial issues, the importance of managing contracts and being prepared and able to secure continuity of service provision, becomes ever more important.
Birmingham City Council v Amey Birmingham Highways Ltd  EWHC 2875 (QB) 2 November 2018
This litigation arises out of a PFI contract of great length and great complexity. In brief, the contract establishes a mechanism for calculating ABHL’s entitlement to payment, which involves the achievement of Milestones. Certified achievement of successive Milestones feeds into a calculation that is set out in Schedule 1 to the Contract. The present litigation relates to the certification of Milestones 6 to 9 and the payment of monies under protest on the condition that such monies were repaid should it be proved that ABHL were not contractually entitled to such payments.
Regulator accuses Allied Healthcare of misleading councils and renews collapse warning
A major provider of care for the elderly has been accused by the Government regulator of misleading local authorities and undermining an official warning that it is at risk of imminent collapse.
Council signs £65m deal with Capita
Westminster City Council has renewed its contract with Capita in a deal worth around £65m over a decade.
Capita will manage the authority’s revenues and benefits services for a further seven years, commencing November 2018, with the option of extending it another three years.
Council ends PFI deal, takes legal action over tower block cladding
Camden Council is to end a private finance initiative deal and take legal action against contractors in a dispute over the recladding of tower blocks. Recladding of the council’s Chalcots estate became necessary following the Grenfell tower fire last year.
Think tank urges greater social responsibility in outsourcing contracts
Loss of public confidence in outsourcing could lead to a £30bn bill for councils if they feel obliged to bring services back in-house, claims the think tank Localis. In a report, Ethical Commercialism, Localis calls for greater social, environmental and economic responsibility when drawing up contracts. It also urged local authorities to make "use of greater procurement freedoms after Brexit to favour firms who act ethically".
Contractor fined £1m after complaints of ‘dirty streets’
Trafford council has fined a bins contractor £1m after residents raised concerns about dirty streets and overflowing bins. The council decided three years ago to outsource waste collection, street lighting and road cleaning to the infrastructure support provider Amey. However, the council’s scrutiny committee has said it will undertake a review of the contract after residents’ complaints led to the fine being issued.
Rethinking Partnerships between the Public and Private Sectors
The new report from NLGN sets out a vision for a fundamental change in culture and practice of partnerships between the public and private sectors following a declining appetite for outsourcing amongst local government.
The hot topic in procurement circles is the recent Court of Appeal judgment in the case of Faraday Development Limited v West Berkshire Council, in which Court made the first declaration of ineffectiveness seen in an English public procurement case since the remedy was introduced in 2009.
Faraday was an unsuccessful bidder in a non-EU tender process. The tender process in question was run by the defendant Council for the appointment of a development partner for the regeneration of the London Road Industrial Estate in Newbury. In the High Court, the Council successfully argued that the development agreement did not create an enforceable obligation on the winning tenderer to carry out the redevelopment and so it was not a public contract for the purposes of the EU procurement rules.
However, the Court of Appeal overturned the High Court decision, finding that although the development agreement was not a public works contract at the time it was concluded because there were no enforceable obligations, the arrangement had to be looked at 'as a whole' and entry into the development agreement was unlawful as the Council was committing itself to entering into a public works contract in the future without complying with the public procurement legislation. This was in breach of both the Public Contracts Regulations and public law principles.
It is also worth noting that the Council had sought to de-risk the remedy of ineffectiveness by publishing a “VEAT” (voluntary ex ante transparency) notice, but the Court held that the wording of the VEAT was insufficient as it did not mention the detailed provisions for the design and execution of a large development.
On a separate note, Coventry City Football Club (CCFC) lost its second state aid challenge against Coventry City Council. The case related to a 250 year lease extension granted by the Council to Arena Coventry Limited, (the company that operates the Ricoh Arena where CCFC play their home games), which was previously half-owned by the Council but is now wholly owned by Wasps RFC as a consequence of the deal under challenge. On the basis that the Council achieved a price consistent with an independent market valuation, it was unarguable that it had granted any state aid.
Council wins Court of Appeal battle over stadium and state aid
Coventry City Council has won a Court of Appeal case in a State aid challenge over the city’s sports stadium. In Sky Blue Sports & Leisure Ltd & Ors, R (on the application of) v Coventry City Council & Ors  EWCA Civ 2252 the Court dismissed an application for judicial review made by Sky Blue over whether a loan made by the council was unlawful state aid.
Council's offer of accommodation within 60-minute commute to family in need not Wednesbury unreasonable
In R (AE) v London Borough of Brent  EWHC 2574 (Admin), the High Court dismissed a judicial review against a decision by the London Borough of Brent to offer the claimant accommodation that was within a 60-minute commute.
City council faces judicial review challenge over day centre closure
Campaigners have launched a judicial review challenge over a decision by Birmingham City Council to close a day centre used by people with a range of physical and learning disabilities.
London borough facing legal challenge over revised statement of licensing policy
Hackney Council is facing a judicial review challenge over restrictions contained in its revised statement of licensing policy (SLP), which it adopted in July this year. The legal action is being brought by a not-for-profit company, We Love Hackney.
Employment law and HR update: the hottest topics of 2018 and future developments
3 December, Bristol
11 December, Birmingham
Housing and Asset Management - At the operational level
9 January, Bristol
Housing and Asset Management - At the strategic level
9 January, Bristol