Many of the provisions in the Localism Act have been promoted as creating new rights for communities. This blog outlines the fate of the proposals for local referendums, and gives an account of the content and current status, and discusses the implications of council tax referendums, the community right to challenge and assets of community value.
A raft of regulations, and in some instances guidance, is needed before various provisions come into force. The government has stated an intention that ‘many major measures’ will come into effect in April 2012 – not so far including those described in this briefing.
This picture will change however, and the situation can be tracked on the DCLG website. The provisions covering advice and assistance to those exercising the right to challenge and to nominate community assets are in force already, so that departmental initiatives may be along shortly. More broadly, the current position on each is noted under the relevant headings in this briefing. The documents referred to can be found through links in the text.
It should be noted that council tax referendums and the community right to challenge will apply in England only. Provisions for listing assets of community value will apply in England and Wales; English counties will need to comply with these requirements only where there are no district councils.
Local referendums abandoned
The clauses that created a general power for the electorate and local communities to trigger a local referendum were withdrawn as the Bill reached its final stages in the Lords. The minister, Baroness Hanham, was reported as having listened to concerns over the expense involved. It was acknowledged that councils already have powers to hold referendums. In separate provisions the Act introduces referendums on council tax, right-to-build and neighbourhood planning. Efforts on the part of some Peers to restore the right to petition (now repealed by the Localism Act) were unsuccessful. The Act also repeals the duty to promote democracy.
Council tax referendums
The proposals for council tax referendums remain unchanged subject to a few minor technical amendments in calculating the basic amount of council tax
Local authorities will be required to hold a referendum if calculations based on principles determined annually by the Secretary of State result in a council tax for the financial year that is ‘excessive’. A parallel set of rules will apply to precepting authorities. The principles, which include a comparison with the previous year, must be approved by the House of Commons. The Secretary of State has the option of specifying an alternative amount for two or more authorities.
An authority that wishes to propose a council tax increase that exceeds that allowed by the principles set by the Secretary of State will be required to produce a substitute set of figures, which will apply if their main proposal is not approved in a referendum. If an authority fails to hold a referendum the substitute calculation will apply by default – an authority can in effect decide to forgo a referendum and adopt its substitute calculation.
Local authorities will be required to conduct referendums on behalf of precepting authorities, but be able to recover their costs. The Act provides for the timing of referendums. Publicity, limits on expenditure, conduct of members and staff of the authority regulations will be covered in regulations, broadly modelled on the existing rules, published in 2007. Those entitled to vote in local elections will be entitled to vote in a referendum.
The question to be determined will not be clear until regulations are published. Concerns were expressed that it would be necessary to avoid using the word ‘excessive’: Lords were told that ministers are taking advice from the Electoral Commission on the form of the referendum question.
The Act also allows for those rare circumstances where compliance with a calculation based on the annual principles would result in an authority being unable to meet its financial obligations or to discharge its functions. In these instances the requirement to hold a referendum will be lifted and the amount of council tax determined by the Secretary of State.
It is intended that the provisions will be effective from 2012-2013 onwards. It is believed that the council tax freeze proposed for 2012-2013 means that there will be no need to hold a referendum in the coming financial year.
Comment on council tax referendums
Councils must comply with central objectives or put them to the electorate in a referendum. The referendum process creates the appearance of local democracy, but the central mechanism is for the Secretary of State to set the parameters for the amount of council tax annually, taking this responsibility away from local representatives. In effect, the referendum process will be used inversely to enforce a council tax framework based on principles set by central government.
In practical terms, councils will want to consider setting aside contingency funds against future referendums. It will also be necessary to take a critical look at the draft regulations when published.
More remotely, there is some risk that the process may open up critical situations; for example, where a council is unable to meet its commitments, the Secretary of State will not be able to determine the amount of council tax where an excess amount has been already been rejected in a referendum.
Community Right to Challenge
A number of changes have been made following consultation and debate in the House of Lords. In particular, a series of amendments ensures that local authorities will be responsible for managing the application process, rather than complying with timetable requirements imposed by the Secretary of State. Initially this approach was rejected by the government, on the grounds that central controls were necessary to restrain councils that were “determined to thwart the exercise of the powers”. However, the Secretary of State does have sufficient powers to introduce regulations if it emerges that the scheme is not working as the government intends.
At Commons Report stage a new clause was introduced, with agreement, which will allow the Secretary of State to provide advice and assistance to those taking part in application processes, procurement exercises, and service provision – assistance to include funding and training. A further change means that bids by employees or former employees are now included in the scheme. The government is considering what sort of support should be offered.
The Act does now includes a requirement that the more significant regulatory powers are subject to an affirmative parliamentary process, rather than going through on the nod, although the Henry VIII powers which would enable a future Secretary of State to rewrite the scope of the right to challenge remain in place.
This part of the Act opens the way for voluntary and community organisations, not-for-profits, charities and social enterprises to trigger a procurement process by expressing an interest in providing or assisting in the provision of council services. It will also be possible for two or more local authority employees to put forward an expression of interest.
On receipt of an application, the council will consider whether to accept or reject the proposal (with possible modifications). An application may only be rejected on specified grounds. In reaching a decision, it will be necessary to consider the social, economic or environmental implications of the proposal. In the case of acceptance, the council will carry out a normal procurement exercise for the service – on a scale proportionate to the value and nature of the service – again taking account of its social, economic or environmental potential.
Councils will be responsible for setting the timetable, taking account of budgetary and decision-making requirements, though the factors to be considered will be covered in guidance. It will be a requirement to publish details of the local framework, and of certain stages in the process of an application.
Much of the detail of how the right to challenge will work in practice will be set out in regulations and guidance. In a policy statement in September 2011, following a public consultation process, the government indicated a number of changes to its original plans. These include changes to the information to be included in an expression of interest, and some minor changes to the grounds for rejecting an expression of interest. Respondents to the consultation were keen that the right to challenge be extended to other public bodies, and the government is currently considering which bodies may be added in future.
The government estimates that this power should come into effect in October 2012. No date has yet been given for publication of regulations and guidance. A decision is pending on which if any services may be exempted from the scheme.
Comment on the right to challenge
Doubts were expressed during the passage of the Bill on the likelihood that exercise of the right to challenge would result in local organisations providing services, and an unsuccessful effort was made to restrict the process to local applicants. Similarly, concerns were expressed about the potential of the scheme to create advantages for commercial bodies. While ministers rejected this risk they confirmed that it is intended that national organisations should be in a position to make applications to carry out services in particular local authority areas.
It will be inevitable that larger-scale open procurement exercises will be triggered by the right to challenge. The provision has to be seen in the context of the Open Public Services White Paper, which represents a fundamental break with the way in which public services are provided, and is intended to open up public services to private and third sector providers. Councils will need to assess the implications for their processes and for accountability and democratic decision making, issues that also deserve to be addressed by local government representatives nationally.
Recent LGiU research has shown that more than nine out of ten councils had not conducted assessments of the risk and opportunities presented by the community right to challenge. LGiU is suggesting that councils prepare for the introduction of the right to challenge by considering:
- What sort of relevant bodies are likely to make challenges in their area and on what services?
- What sort of dialogue will enable and encourage this process to be positive rather than adversarial?
- How will procurement strategies, contract management etc. enable community groups to come forward and take on services?
A number of amendments have been made to the original Bill in the light of a consultation on community assets and influenced by issues raised by MPs and Peers. Certain responsibilities that were initially left to be the subject of regulations are now dealt with in the Act itself. These include how land will be identified as being of community value, with local authorities responsible for determining whether a property qualifies for inclusion in a list. The processes to be followed when a landowner wishes to put a listed property up for sale are now explicit, including timetable and steps to be followed by the owner and local authority. The effect of these amendments is outlined below. Further amendments clarify protection of private interests in more detail. Some issues remain to be dealt with by regulations. There will be nationally based powers to provide advice and assistance, include funding and training, to those taking part in application processes in both England and Wales.
Parish and community councils and local voluntary and community organisations will be able to nominate local land or buildings to be included in a list of community assets maintained by local authorities. A property will be included where its current primary use furthers the social wellbeing or social interests of the local community, and where it is realistic to think that this use will continue. A property will also qualify when it has been in such use in the recent past, and this may realistically recur within the next five years (whether or not in the same way before). Regulations will exclude certain buildings or land – primarily wholly residential premises – and will allow the local authority to determine where the regulations apply to a particular property. Social interests include culture, recreation and sport.
The effect of inclusion will be to require the owner of the property to notify the local authority when intending to dispose of a listed asset, so triggering a moratorium period during which community interest groups can apply to be treated as potential bidders. The owner will be able to begin the sale process after an interim period of six weeks if no bidder has come forward, if a written intention to bid is received in that time then the full six month moratorium period will apply. An eighteen month protection period has also been created: if this expires before the property is sold the original notification process must start again.
Councils must publish the list of properties which comply with the regulatory framework, and will also need to maintain lists of properties where nominations have failed – though the latter is less prescribed than previously – in accordance with the five-year timetable. They will be responsible for notifying owners and occupiers of listings and receipt of notices, and for publicising the possible sale of a listed asset. It will be necessary for neighbouring councils to cooperate where a property falls in more than one local authority area.
The proposal involves considerable interference in private rights, which are protected to some degree by the owner of a listed property being able to request a review of the listing, and by the introduction of an interim moratorium period. A property will only remain on a list for five years, when a further application would need to be made. Listing will be recorded on the Land Registry. The Act provides rights of review and appeal on the listing of a property, and makes provision for compensation to be paid to landowners for losses arising from being involved in a lengthier sale period.
Further plans outlined in a September policy statement include a revised Impact Assessment on which the cost of the compensation scheme and costs to authorities of maintaining the list and managing the scheme will be assessed. The DCLG has stated that these costs will be met by the department – careful attention will need to be given to how they are calculated. A series of regulations are required to put the community assets programme into effect; these include closer definition of local community interest groups, reviews of listing decisions and owner’s appeals, excluded transactions and excluded properties, arrangements for compensation, and enforcement provisions. The September statement makes a commitment to introduce these ‘as soon as possible’
Comment on community assets
The full range and impact of this proposal is not yet clear, though it may have some value in ensuring that such issues are dealt with locally without direct ministerial intervention as has occurred in the recent past. Difficulties in defining general criteria to be taken into account by local authorities in categorising assets as being of community value were acknowledged during the passage of the Bill. The criteria finally adopted are wide enough to allow considerable discretion on the part of decision-makers, but also indicate that for a nomination to be successful proposers must demonstrate significant social value in use of the property. It remains to be seen what impact the scheme will have on the local environment and whether it will meet the expectations of its supporters. Many MPs reported concern in their constituencies over the retention of local pubs and other privately owned businesses, and the relevance of the provisions for the future of communities. The future of the high street was raised during the passage of the Bill. There were also queries as to whether the new legislation goes far enough in protecting assets of community value from being transferred to the private sector.
Councils will benefit from planning ahead for the implementation of these new provisions. It will be a particular challenge to manage expectations: the realities of competing locally to provide services or taking steps to protect a local social asset are likely to be less certain than suggested by the rhetoric which is accompanying the promotion of the Act.
In addition to the measures suggested above, LGiU is recommending that every council should be producing a simple guide to the Localism Act for its residents and stakeholders, which sets out what is possible in the context of the detail (much of which is as yet unspecified) of what will be involved . For example, a local community may wish to take over a closed post office, thinking they can do so and so save the service, and believing this is possible using the Localism Act. In reality this will be much harder to achieve, and there will be a risk that the council appears uncooperative. It will be important that councils are not perceived as obstructing these opportunities, but can provide a basis that will enable local organisations to use the new provisions in a constructive rather than adversarial way.
Future use of the considerable regulatory powers created by the Localism Act needs to be kept under observation. The current set of regulations needs to be examined carefully when drafts are published, but it will also be necessary to be alert for future developments, should the Secretary of State decide the framework needs to be adjusted if the scheme is not meeting his objectives. Nor should it be forgotten that the community right to challenge is one aspect of a larger policy drive for changes in the provision of public services. The Secretary of State has considerable Henry VIII powers to change the scope of the scheme – this is a situation that needs to be kept under close observation.
The Act creates a range of new responsibilities for local authorities, and LGiU is providing a number of opportunities for councils to get to grips with its implications over coming months, running successful sessions on the Act for councils both individually and jointly as part of its Learning and Development programme. Particular topics are also the subject of LGiU seminars in December.
This post is based upon an LGiU members briefing by Hilary Kitchen –Localism Act: Community Rights. For more information on the benefits of LGiU membership, please click here.