An introduction to the Localism Act

The Localism Act seeks to give effect to the Government's ambitions to decentralise power away from Whitehall and back into the hands of local councils, communities and individuals to act on local priorities.


When the bill was introduced to Parliament in December 2010, the LGA welcomed key elements of the draft legislation, such as the implementation of the General Power of Competence and the dismantling of the existing complex, bureaucratic and inefficient housing finance system; both of which followed long campaigns by the LGA to secure greater freedom and flexibility for councils.

In Essential Localism, we praised Government for their progress to decentralise power and decision-making through the draft bill. We also recognised that more needed to be done to avoid falling back on traditional central government tools, like regulation- and guidance-making powers, to prescribe the change ministers wish to see enacted at a local level.

Missing media.

Over the course of the next eleven months, up until the Localism Act received Royal Assent on 15 November 2011, the LGA has continued to lobby MPs and peers to secure amendments, which enable this legislation to more adequately reflect the coalition's commitment to localism, and meet the needs of councils and their communities.

This section goes through the key provisions of the final Act, explaining how these differ from the original bill and identifying some of the implications for councils.

    Local government

    The General Power of Competence

    This new power replaces the previous power of well-being and, after years of LGA campaigning, gives councils the same broad powers as an individual to do anything unless it is prohibited by statute. Parliament has clearly laid out its intention to give councils the freedom to be creative and entrepreneurial, acting directly in the interest of their communities and in their own financial interest. This power offers a real opportunity to support councils to work in new ways without the same concerns over acting beyond their legal powers, or ultra vires.

    The transfer and delegation of functions to councils

    The original Localism Bill would only have enabled the Secretary of State to confer new powers, and the functions of public bodies, onto elected mayors. Following LGA lobbying however, any local authority will be eligible to make an application to the Secretary of State to take over other local public functions that are a high priority for their communities. This provision offers a significant opportunity to ensure decision-making is devolved to the lowest appropriate level, and result in more locally responsive public services. There is now a duty on the Secretary of State to consider such proposals from councils, considering whether a transfer would promote economic development or wealth creation, or increase local accountability.

    Elected mayors

    The original bill gave the Secretary of State the power to force a "shadow mayor" onto an area in advance of that area holding a referendum on whether they wished to convert to an elected mayor leadership model. It was further suggested that regulations would require that new elected mayors took on the role of chief executive in their local authority. Following LGA lobbying, the Government has completely removed all references to "shadow mayors" and mayors as chief executives from the final Localism Act, meaning that all local areas will continue to decide via a referendum whether they want to introduce a mayor. Minsters will still have the power though, to demand that an area holds a referendum.

    Changing governance arrangements

    The original bill would only have allowed councils to change their governance systems after the next local election, which in some cases would have meant authorities not able to make a change, such as returning to the committee system, for as much as three years after the bill came into effect. The LGA raised our members' concerns with Government and secured significant changes to allow councils to resolve at any time to change their governance arrangements and implement those changes at a time that best suits their circumstances.

    Predetermination

    The Localism Act has introduced provisions to clarify the principle of predetermination in local government, helping councillors to engage in an open and rigorous debate with their local communities about council business. The Act clarifies that decision-makers will not be taken to have had (or to have appeared to have had) a closed mind when making the decision just because (i) they had previously done anything that directly or indirectly indicated what view the decision-maker took, or would or might take, in relation to a matter, and (ii) the matter was relevant to the decision.

    Amendments relating to standards

    The Act has abolished the Standards Board and placed a duty on local authorities to promote and maintain high standards of conduct. Following amendments in the House of Lords, councils must now adopt a code dealing with the conduct that is expected of members and co-opted members of the authority when they are acting in that capacity, rather than it being voluntary to create a code. This code, when viewed as a whole, must be consistent with the ‘Nolan' principles of public life, i.e. selflessness, integrity, objectivity, accountability, openness, honesty and leadership. The monitoring officer of a relevant authority must also establish and maintain a register of interests of members and co-opted members of the authority.

    Pay accountability

    Local authorities must now publish a pay policy statement for the financial year 2012-13 and subsequent years. A relevant authority's pay policy statement must be approved by a resolution of that authority before it comes into force, with the first statement prepared and approved before the end of 31 March 2012. The Act specifies a number of elements that must be covered by the statement including: the level and elements of remuneration for each chief officer, remuneration of chief officers on recruitment, increases and additions to remuneration for each chief officer, the use of performance-related pay for chief officers, the use of bonuses for chief officers, the approach to the payment of chief officers on their ceasing to hold office under or to be employed by the authority, and the publication of and access to information relating to remuneration of chief officers.

    Community empowerment

    Local referendums

    The original bill would have required councils to hold a non-binding referendum on any "local matter" if a petition of 5% of residents was submitted. The Secretary of State would have decreed in regulations would what constitute a "local matter" and could issue further regulations dictating how referendums would be run, and what publicity could be issued. The LGA has been successful in ensuring the local referendums provisions are completely removed from the final Act, which we estimate will save councils £310 million over the next 10 years.

    Council tax referendums

    The final Act includes provisions for the Secretary of State to set the principles for excessive council tax. The principles for a financial year must be set out in a report, which must be laid before the House of Commons. A duty is placed on the billing authority, major precepting authorities (for example, county councils) and local precepting authorities (for example, parish councils) to use these principles to determine whether their relevant basic amount of council tax for a financial year is excessive. Where they determined that the amount is excessive, the billing authority will be required to hold a referendum. Subject to regulations, a billing authority may recover from a precepting authority the expenses that they incur in connection with a referendum held in relation to the precepting authority's relevant basic amount of council tax. The billing and precepting authorities also have a duty to produce substitute calculations which are not excessive. These will have effect for that financial year if the result of the referendum is that the proposed amount of council tax is not approved by a majority of persons voting in the referendum.

    Community right to challenge

    Under the community right to challenge a broad range of alternative service providers will be able to submit an expression of interest to run a service, with the potential to trigger a council procurement exercise. In the original bill the Secretary of State had the power to decree all the practicalities of how this policy worked locally. The LGA lobbied against this and the Government subsequently introduced amendments to delete the Secretary of State's powers to specify the minimum periods which authorities can specify for the submission of expressions of interest, and to specify the minimum and maximum periods which must elapse between the acceptance of an expression of interest and the commencement of a procurement exercise. Instead councils will be required to specify and publish details of these periods.

    Assets of community value

    Otherwise known as the community right to bid, these provisions provide extra time for parish councils and local voluntary and community groups to prepare their bid to purchase a listed community asset should the current owner choose to dispose of it. The original bill gave the Secretary of State the power to centrally prescribe how this section would work locally; dictating how a list of assets would look, how a council could amend it, how they would contact people who owned assets that were, or were not, added to the list, and how a list of rejected assets would look. The Secretary of State would also have specified in regulations the moratorium period before which an asset on the list could be sold. After LGA lobbying the Government introduced amendments, placing a definition of an "asset of community value" and the length of the moratorium period on the face of the Act. Some of the unnecessary regulation-making powers have also been removed to give councils local flexibility, and the LGA will be working to influence the contents of future regulations.

    EU fines

    The LGA strongly opposed the European Union (EU) fines policy contained within in the original Localism Bill, pointing out that it was unfair, unworkable, unconstitutional and dangerous to simply allow ministers to arbitrarily pass on EU fines to councils when UK obligations aren't met.

    After it became clear that the Government would not delete the clauses completely, the LGA and the Greater London Authority negotiated with the Department for Communities and Local Government (CLG) to ensure that our member councils would be fully safeguarded from unfair fines.

    As a result the final Act now requires ministers to lay before both Houses of Parliament, on a case-by-case basis, details of every council they intend to pass on a fine to, including the EU law they have breached and the total of the fine. This will be subject to a vote in both Houses. An independent panel will also scrutinise, and advise, on any suggested fine, with some members of the panel nominated by local government.

    See the section on EU Fines for further information on these provisions and a draft statement of policy which the LGA has produced with CLG, which the Government will consult on:

    EU fines

    Non-domestic rates

    • discretionary relief on non-domestic relief
    • automatic small business relief
    • the cancellation of back-dated non-domestic rates.

    Planning

    There are a large number of changes to the planning regime outlined in the final Localism Act, covering:

    • Plans and strategies: a duty to co-operate in relation to the preparation of development plan documents as well as other documents is now in place for local planning authorities, county councils and a range of other bodies to be prescribed in regulations.
    • Neighbourhood planning:  The original bill introduced new neighbourhood forums, made up of at least three local people, which would have the power to submit neighbourhood plans and neighbourhood development orders designed to fast-track planning applications supported by the community, without any safeguards to ensure they operated fairly. LGA lobbying, however, has secured amendments so forums require a minimum of 21 people and can include representatives of local business interests. Councillors will now have the right to sit on neighbourhood forums if they wish to and councils will have the power to de-designate neighbourhood forums if they no longer fulfil their function. Councils will also be able to take representativeness and transparency, amongst other things, into account when deciding on applications to become neighbourhood forums, and act as examiners for the purposes of assessing neighbourhood planning and orders.

    As well as:

    • The Community Infrastructure Levy
    • Consultation and enforcement
    • Nationally Significant Infrastructure Projects
    • Local Finance Considerations

    These provisions of the Act are examined in more detail in our planning section, which also provides details of the LGA's support offer to councils:

    The planning provisions section

    Housing

    There are a large number of changes to housing outlined in the final Localism Act. They include:

    • Allocations: requiring councils to put in place an allocations scheme for determining priorities and procedures to follow, with reasonable priority given to certain specified groups of people.
    • Housing finance: the Act abolishes the housing revenue account (HRA) and sets out how councils can become self financed. The Bill enables the Secretary of State to retain a proportion of Right to Buy receipts, and provides the power to change the settlement payment in the future and to determine how much housing debt a local authority is allowed to take on. The LGA has campaigned throughout for Government to allow councils can keep 100% of Right to Buy receipts and, at the very least, ensure that local authorities are involved in how the cap on borrowing to invest in social housing is calculated.

    As well as:

    • Homelessness duty
    • Tenure and Tenancy Strategies
    • Regulation of Social Housing
    • Democratic filter and Housing Ombudsman.

    These provisions of the Act are examined in more detail in our housing section, which also provides details of the LGA's support offer to councils.

    The housing provisions section

    Next steps

    Following Royal Assent, the Localism Act is now a law and thus many of provisions will come into force on or shortly after enactment on 15 November 2011, according to the commencement provisions contained in section 240 of the Act.

    However some sections of the Act will not come into force until a later date. This will be determined by the Secretary of State, with the CLG intending to introduce further regulations and guidance to outline how these provisions of the Act will work.

    The LGA is now urging Government to:

    • keep all new guidance to a minimum
    • support sector-led best practice, rather than central dictation
    • honour the EU fines draft policy that we have developed.

    Further information about draft regulations and available support will be added to this site as soon as they become available.