Update: local government

Draft structural reform plan

The announcement by the new coalition government of immediate spending cuts across the public sector made headlines in June. Local government did not escape '“ £1.165bn of savings to be achieved in the current financial year. Much greater reductions in future expenditure programmes are expected in October with the outcome of the comprehensive spending review.

Out of the headlines, but equally important for the future of local government, the Department for Communities and Local Government published its draft structural reform plan in July, preparing the way for legislation in the autumn. Enactment of a localism bill is planned for November. This will be a flagship for the government's Big Society policies. The legislation will open the way to tackle the Big Society priorities identified by the DCLG. These are to:

• decentralise power and devolve decision making down to neighbourhood level where possible;
• meet housing aspirations by speeding up the planning system, incentivising local authorities to facilitate housing growth and increasing the mobility of social housing tenants;
• put communities in charge of planning with incentives for development and growth;
• increase local accountability, with less central and regional control; and
• improve transparency of spending.

The plan sets out action lists explaining what the DCLG is doing, why and how, and timescales which envisage rapid progress.

Its clarity and precision is a model of good communication quite unlike the usual Whitehall fudge '“ this is government, new style. This government is about change, and being accountable for achieving it.

Part of the programme for decentralisation of power has already started: regional development agencies and the Government Office for London are to be abolished, and the formation of three new unitary authorities (Devon, Norfolk and Suffolk) has been stopped. Part of the programme for streamlining the planning system has also begun: regional spatial strategies have been withdrawn. The Infrastructure Planning Commission will also go.

The new localism bill will create new powers for neighbourhoods and local authorities to lead economic growth and regeneration with financial support from the regional growth fund, and for local authorities and businesses to create new local enterprise partnerships. The ability of social housing tenants to follow job opportunities will be made easier. The notoriously complex financial controls around each local authority's housing revenue account will be dismantled. A major overhaul of planning policy should be in place by April 2012. New measures to bring empty homes back into occupation, and for making better use of existing public buildings, land and capital investment in public building projects, will also be formulated.

All this is promised, as well as greater financial autonomy for local government over what little may be left in the pot after the comprehensive spending review.

So, the dusty corners of town halls up and down the country are going to have more than just their cobwebs removed. How will local government rise to the challenges of these new freedoms, and do more with less? The new localism calls for a new breed of council leaders who can engage, inspire, move and shake their communities. Let's hope some leaders acquire superhero powers soon.

Public procurement breaches

A claim against Leeds City Council brought by Montpellier Estates Limited (MEL) may be tested at trial after the council's unsuccessful application to strike out MEL's claim. The claim in Montpellier Estates Limited v Leeds City Council [2010] EWHC 1543 (QB) relates to purported breaches of public procurement regulations in a procurement exercise involving the proposed development of a music arena and associated facilities in Leeds.

MEL entered into a procurement process initiated by the council, putting forward a proposal for the development to take place on its own site which was one of four sites identified as potentially suitable for the development scheme. It is contended that MEL's involvement in the tender process was later terminated by the council on the same day that the council publicly identified an alternative option involving a publicly owned scheme. The publicly owned scheme involved a site owned by the council and a university.

MEL claims the procurement process was not conducted fairly and transparently. It claims the council used it as a 'stalking horse' despite repeated assurances from the council to the contrary '“ that the council embarked on a parallel track of providing an alternative public development option, while not only withholding that information from bidders but taking positive steps to conceal it. MEL's claim is that the alternative public development option was not merely a hypothetical 'public sector comparator' against which to assess or measure the tender proposals, but in effect constituted a 'competitor' for the purposes of the tender.

The application and interpretation of the Public Contracts Regulations 2006 (SI2006/5) lies at the heart of the issues in dispute '“ the procurement process having been initiated in 2007 '“ though there are additional allegations of breaches of statutory duty and implied contract.

It remains to be seen whether or not MEL will eventually succeed in its claim but proceedings of this type bring the need for complete openness on the part of procuring authorities in any tendering process into sharp focus. Specifically, where there is an 'in-house' bidder, procuring authorities should communicate this clearly to tenderers and display openness and fairness not just through verbal and written assurances but also through their conduct.

A procuring authority must do the right thing, and be seen to do the right thing. This will help avoid accusations at a later date by tenderers that they were somehow 'led up the garden path' while in reality a secret 'competitor' existed in the form of the procuring authority itself. In the absence of such transparency, as this case shows, costly challenges and litigation may result whether or not the legal requirements have been met. Furthermore, a procuring authority should not assume that termination of a tender process can be effected without some legal consequence.

Surveillance of school-place applicants

Poole Borough Council carried out covert surveillance of a family between 10 February and 3 March 2008 to investigate whether an application for a school place was fraudulent.

The surveillance was carried out to determine whether the family's ordinary residence was at a property in the catchment area of an oversubscribed school, after the council had received phone calls from two members of the public alleging the family did not live at the property but at another property outside the catchment area.

The council claimed the surveillance operation was lawful and duly authorised under the Regulation of Investigatory Powers Act 2000 (RIPA). It claimed the surveillance was necessary for the prevention or detection of crime, and that it was proportionate.

However, the tribunal held this was not a proper purpose, nor was it necessary to use the surveillance powers. It also held that the council had interfered with the family's rights under article 8 of the Human Rights Act 1998.

The tribunal was also critical of the council's conduct in putting the family's three children under surveillance. In add-ition, it pointed out that the council had not sought to interview the family, visit the properties in question or to make inquiries in the locality of the properties before resorting to surveillance.

The council issued a statement accepting the ruling and indicating that it had 'listened to public concerns about this case and subsequently decided that RIPA powers were no longer an appropriate means of investigating potentially fraudulent applications for school places'.

This ruling reminds local authorities to think carefully before employing powers under RIPA. In particular, an authority should consider whether the activity proposed is proportionate to the objective. If covert surveillance is to be authorised, there should also be a proper procedure for its use.

The government is reviewing the use of RIPA powers by local authorities as part of the counter terrorism review announced by the home secretary in July. The Coalition Agreement stated that the government intends to ban local authority use of RIPA unless 'signed off by a magistrate and required for stopping serious crime'. With the outcome of the review expected in a few weeks, further developments in this area are clearly on the horizon.

Transparency agenda

The government has made no secret of its desire to revolutionise how local government goes about its business, putting openness and accountability at the core of its drive towards the new localism.

Soon after the general election, communities secretary Eric Pickles wrote to all councils urging them to throw open their books to a much greater degree than previously seen. As part of this, councils were asked to publish details of all spending on goods and services over £500 as well as invitations to tender and final contracts on projects over £500.

Pickles made it clear that openness and transparency should become embedded in local government culture. He called on them to take swift action not just in relation to the disclosure of goods and services bought in, but also in other areas of spending such as salaries and allowances. While this may empower an army of armchair auditors, it remains to be seen whether this is a credible alternative to the Audit Commission which the coalition intends to abolish.

Recently we have seen the emergence of the Public Sector Transparency Board and a new government website '“ data.gov.uk '“ aimed at pushing forward the coalition's transparency agenda. Councils are expected to start to make details of expenditure above the £500 threshold available from September onwards, with more widespread disclosure beginning from 2011. Draft codes of practice are also expected soon and will be subject to formal consultation. The expectation is that councils will see the benefits for residents and grasp this agenda at the earliest opportunity, and it is indeed the case that some councils across Britain were already leading the way in the greater disclosure of spending details before the coalition's announcements.

Critics argue that setting local government data free will involve the development of costly reporting solutions and will increase the administrative burden placed on councils. Others argue that the drive towards transparency and openness will not only shine a spotlight on waste but will strengthen the position of the voluntary sector and small businesses in bidding for new contracts.