It seems that every week there are a steady stream of exhortations from the government to local authorities. This week, the Communities Secretary Eric Pickles urged councils to make more use of the charging and trading powers to generate cash by offering and charging for services. He gave as examples of innovation and creative thinking those councils which:
- Utilise their council-run MOT test centres for checking the safety and roadworthiness of their own vehicles to offer an MOT service to the public and generate income.
- Offer insurers, who require an annual tree inspection of trees within a policyholder’s premises, a tree inspection service carried out by members of their arboriculture team using their expertise and equipment.
- Using powers in the Highways Act 1980 relating to the maintenance of highways and dropped kerbs, offer a service to residents who wish to create a driveway from the roadway through to the edge of their property.
Although local authorities have a wide power to charge for discretionary services under section 93 of the Local Government Act 2003 (LGA 2003), it should be remembered that this power supplements, rather than replaces, charging powers contained in other legislation and cannot be applied to services that a local authority has a duty to provide. Nor does it apply where there is already an existing power or prohibition to charge.
Under section 95 of the LGA 2003, relevant authorities in England and Wales have the power to engage in entrepreneurial commercial trading with private bodies and persons. However, the following restrictions in relation to the exercise of section 95 must not be forgotten:
- The trading must be function-related.
- The power cannot be used to authorise commercial trading in relation to a function that a local authority is under a statutory duty to provide.
- The trading power cannot be used if an alternative commercial trading power already exists.
There are various steps a local authority should consider taking in relation to charging for a discretionary service to minimise the risk that any decision it takes to charge is subsequently challenged, although depending on the scope of the discretionary services not all these steps will necessarily apply. Having decided on the service that is to be offered, a local authority should bear in mind the guidance issued by the Office of the Deputy Prime Minister on the power in the LGA 2003 and:
- Identify the statutory power to provide the service and ensure there is no prohibition on charging.
- Ensure that the service is discretionary.
- Carry out market analysis and customer research to see if there is a demand in the area for the particular service. In relation to the annual inspection of trees offered to insurers, the local authority concerned undertook the work following an analysis of the local area which found that there was an extreme skills shortage in this sort of service.
- Consider whether the proposed service may impact on local businesses. If it is possible that it may, it would be appropriate for the local authority to consult with those businesses and others who may be affected.
- Prepare a business plan for the service activity, including a risk analysis.
- Consider the terms and conditions that should apply to the service.
- Establish an appropriate control and accountability mechanism.
- Check that the existing professional liability insurance remains valid for the authority and its officers in respect of the new service being offered.
- Check that the proposed charge for the service is in line with any existing charging policy the authority may have (assuming that one exists).
- Consider the billing and third party arrangements.
For more information on charging and trading, and the approach that local authorities should take when making a decision to ensure that it cannot be subsequently challenged, see the following PLC Public Sector practice notes: