In some parts of the country communities fail to thrive because the market does not supply the services local people need at a price they can afford to pay. The recent recession showed this in sharp relief.
Market failure of this kind needs to be addressed if communities are to be kept viable. Enterprising councils have stepped in to correct market failure of this kind by providing services themselves.
By entering the market the council may be seeking to moderate prices for essential services. This may be necessary where the absence of competition means that price rises are not being kept in check.
The 'wellbeing power' ( Box 3) provides the statutory basis for action of this kind.
The delivery of new discretionary services, charged for on a cost-recovery basis, is an option for councils faced with a challenge of this kind. Charges may be subsidised where this is merited.
A local authority trading company is another option although the commercial purpose of the company means that it would not suit every case.
The power to do anything the council considers likely to promote or improve the economic, social or environmental wellbeing of the area (the 'wellbeing power') was introduced by the Local Government Act 2000.
The 2000 Act specifically authorises arrangements or agreements with any person and the provision of staff, goods or accommodation to any person. Here "any person" includes those in the private sector.
There are also powers to give financial assistance and to enable cooperation, coordination and facilitation of others' activities.
There are two important limitations on the use of the wellbeing power. It cannot be used to:
- do something that the council is unable to do due to a prohibition, restriction or limitation on its powers contained in other legislation, or
- raise money by way of a precept, borrowing or otherwise.
For the purposes of the power to charge, the 2003 Act overrides the prohibition on raising money. Government guidance on trading and its use in conjunction with the wellbeing power explains that activities under Section 2(1) of the 2000 Act, such as the provision of goods and services, can now be traded, that is made available at a commercial rate in connection with the exercise of the wellbeing function.
10 May 2012