Trading and charging

Trading  

Trading is not new. Councils have been able to trade using powers contained within The Local Authorities (Goods and Services) Act 1970. Using the 1970 Act councils have been able to trade with other local authorities and other defined public bodies and it is not limited to mere cost recovery. In other words trading under the 1970 Act has been legitimately used to make a profit. However restrictions applied to trading under the 1970 Act which meant that it could not be used for trading with the private sector or with local citizens. This fettered councils unnecessarily.

However Councils have also been able to rely on a range of other powers (and equivalent legislation in Scotland) including:

• The Civic Restaurants Act 1947
• Section 145 of the Local Government Act 1972 (Provision of entertainments)
• Section 19 of the Local Government (Miscellaneous Provisions) Act 1976
• (Recreational facilities)
• Section 38 of the Local Government (Miscellaneous Provisions) Act 1976
• (Power to provide computers and computer facilities and making use of
• spare capacity)
• Orders made under section 150 of the Local Government & Housing Act 1989 (i.e. HMOs Charges for Registration Schemes, Recovery of Costs for
• Public Path Orders, Charges for Land Searches and Charges for Overseas Assistance and Public Path Orders)

More recent Trading

Sections 95 & 96 of The Local Government Act 2003 contained new powers for local authorities (best value authorities) to trade in function related activities through a company and also provides for the regulation of those trading powers. In addition, the Localism Act 2011, reaffirmed that local councils can trade through a company, although the Act places a restriction on the company taking the form of an LLP ( A limited Liability Partnership).  The Localism Act generally only applies to England. The Local Government Act generally applies to England with some matters deferred to the Welsh Assembly Government.

Differences between Charging and Trading

Charging relates only to discretionary services, whereas the power to trade is for all services. All best value authorities can use the power to charge and to trade but charging is limited to the recovery of the cost of providing the service whereas trading can be at a ‘profit.’

Although there are ways to trade without a company under historic powers if local authorities in England intend to trade under the Local Government  Act 2003 and the Localism Act 2011 generally means that trading needs to be through a company.

Trading and charging in Scotland

Trading and charging are not distinguished within Scotland and the differences between provisions within English and Welsh authorities and those within Scotland are stark.

Three provisions in the Local Government in Scotland Act 2003 are directly relevant to the issue of trading by local authorities, whether such trading relates to internal or external agreements. They are:

• the duty to secure Best Value (which also repealed Compulsory Competitive Tendering (CCT) legislation)
• the duty of Community planning
• the Power to advance well-being.

The three measures are inter-connected.

Section 8 of the LGISA2003 amends the Local Authorities (Goods and Services) Act 1970 (LAGSA1970) so that the external agreements to which it applies relate only to trading operations, and defines those trading operations as those for which, under proper accounting practice, the local authority must keep trading accounts.

Within Scotland the volume of trading is subject to limitation for work using the 2003 Act powers, however the limit remains to be set by the Scottish Government.

Trading and charging in Wales

Section 95 of the Local Government Act 2003 allows the National Assembly for Wales to make orders conferring on best value authorities the power to trade on commercial terms, for a profit. The Act imposes certain conditions on the use of that power, and allows the Assembly to impose others by order. There is an option for the Welsh Assembly to look at provisions under the Localism Act 2011 but so far they have not amended the legal position on Trading for Welsh Local Authorities.

The Welsh Assembly Government makes its own determination about how the powers might be restricted in Wales to safeguard Welsh interest. Such circumstances include:

• Sustained and serious trading losses which called into question the overall financial health of the authority;
• Clear evidence of an authority’s non-traded services (especially those which it is obliged to provide) suffering a significant drop in standards because of undue emphasis being placed on trading operations;
• Major irregularities in trading accounts or lack of proper management controls;
• Breaches of the bar on continuing subsidy to local authority companies, or of competition or State aid law.

Trading and charging in Northern Ireland

The provisions within the 2003 Local Government Act do not apply in Northern Ireland and so too the Localism Act 2011  and therefore Northern Ireland local authorities are subject to much more restrictive and narrower powers to trade and charge for services. However the availability of the Local Authorities (Goods and Services) Act 1970 is a particularly useful power however it is as originally enacted with many of the subsequent amendments to that Act not applying in Northern Ireland.

Northern Ireland councils must therefore identify a power available to them before undertaking trading and charging activity in much the same way as English authorities before the enactment of the Local Government Act 2003.

APSE support with trading and charging

APSE has a team of experienced professionals with access to specialist legal teams to help local authorities develop a strategy for charging, trading and income generation. APSE Solutions service is able to look at current income generation strategies and help determine the most viable way forward to generate much needed additional income whilst at the same time ensuring that strategies are sympathetic to the local economy and do not ‘squeeze out’ local suppliers of similar services. The legal input will also consider the most cost-effective and efficient way of developing a charging or trading strategy with the minimum costs and delays.  To enquire about using one of our professional team telephone 0161 772 1810 or email [email protected]