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The power of general competence proposed in the Localism Bill means, in future, courts will have to assume a council has acted lawfully, unless it has broken a law, says Paul McDermott After the gloom of severe public spending cuts, the coalition government has, through the draft power of general competence, proposed a significant constitutional change which heralds real devolution for local government. Clause 1 of the Localism Bill gives councils the power to do anything that individuals may generally do. As a comparison, this is a broader power than that enjoyed by charities or companies. The power of general competence is a radical proposal which overturns the existing constitutional position that local authorities are ‘mere creatures of statute'. That historic doctrine has restricted local authorities to slavishly do only those things expressly written in legislation, and has often been a barrier to local authorities undertaking innovative action. Under the proposed new power, the default position is that local authorities have the power to act unless there is an express statutory prohibition preventing them from doing so. In practical terms, this means in future, when the courts are considering whether a local authority has acted lawfully, they will have to presume they have done so unless their actions have breached a statutory restriction or prohibition. This should give councils the confidence to diversify their activities and banish the fears created by the London Authorities Mutual Limited judgement. This could be a powerful tool to increase income or achieve efficiencies through greater co-operation with other public bodies and the third sector. The power of general competence has a number of restrictions and generally, these are consistent with limitations imposed in previous local government Acts. For instance, where existing legislation expressly prohibits or restricts local authorities, that limitation will remain, and Parliament or the secretary of state may, through future legislation, impose new restrictions on the use of the power. This may lead to interesting ‘cat and mouse' games in the future between innovative local authorities and controlling secretaries of state. The power also permits local authorities to charge or trade, as is already provided for in the Local Government Act 2003. Interestingly, the power introduces a concept of local authorities doing things for a ‘commercial purpose'. An interesting by-product is that it entrenches the requirement for local authorities to undertake commercial activities through a limited company, or an industrial and provident society. This may mean, in future, local authorities are not able to make use of limited liability partnerships or other corporate entities when they engage in any commercial activity. A power without funding may seem a hollow consolation prize in the current climate. However, it is a tool which, if used effectively, could enable councils to diversify their income base and implement savings. Paul McDermott is partner, Trowers & Hamlins' public sector commercial department

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WHITEHALL

A power to get on with it!

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