Communities and Local Government

• Local government
• Local authority activity under Section 137, Local Government Act 1972

Local government

Local authority activity under Section 137, Local Government Act 1972

Although this report was commissioned by the Office, the findings and recommendations are those of the authors and do not necessarily represent the views of the Office of the Deputy Prime Minister.

Local Government Research Unit

Nigel Mason, Roger Turner and Michael Dodd, York Consulting Limited

Key Findings:

• There is a general view amongst authorities that s137 is of limited importance, given the scale of the financial limit relative to their total expeniture, and the even smaller scale of actual spending.
• Many authorities indicated that their power under s137 is 'irrelevant' to the key issues and concerns which they face. It is therefore not perceived as an adequate power for promoting the well-being of their areas and/or their inhabitants.
• There is, however, a strong view amongst authorities that their power under s137 is useful, because it provides essential flexibility, and subject to the definition of the proposed new duty, should be retained.
• During 1996/97, 92% of authorities reported that they had made use of s137. The average use was 31% of the available financial limit. The level of usage of s137 over the past five years has remained stable. Counties and metropolitan districts were lower users of s137 than shire districts and unitaries.
• Nearly three quarters (73%) of expenditure under s137 was accounted for by grants to voluntary and community organisations and the administration of these grants. Other reported uses of s137 include economic development, planning and environmental issues, and crime prevention/community safety.

Introduction

Section 137 of the Local Government Act 1972 allows a local authority to spend a limited amount on activities for which it has no specific power, but which the authority considers 'will bring direct benefit to the area, or any part of it or all of some of its inhabitants'. The Local Government and Housing Act 1989 added the requirement that the benefit obtained should be commensurate with the expenditure incurred.

In the context of taking forward the Government's commitment to introduce the proposed new duty for local authorities 'to promote the economic, social and environmental well-being of their areas', the DTLR commissioned York Consulting Limited to establish evidence on the use being made of s137 powers; the types of activities on which s137 expenditure is being incurred; and whether s137 powers are perceived as an effective means of promoting community leadership

The study

There were two key stages to the study. The first stage involved 46 case studies covering a range of authority types, regions, political control and levels of usage of s137. The case studies were followed by a postal survey of all local authorities in England, undertaken in early 1998, collecting data on the extent of authorities' use of s137. The questions focused on authorities' use of s137 during 1996/97, although data on past use was also collected. A response rate of 75% was achieved

Table 1: Use of s137 in 1996/97 by type of local authority
Section 137 spend as a % of the limit	Counties	Mets	London	Unitaries	Districts	All authorities
Over 90%	0%	4%	8%	14%	7%	6%
76% to 90%	3%	0%	4%	9%	11%	9%
51 to 75%	6%	11%	19%	45%	26%	23%
31 to 50%	25%	14%	8%	23%	20%	19%
11 to 30%	25%	18%	38%	5%	20%	21%
1 to 10%	22%	39%	19%	4%	10%	14%
0%	19%	14%	4%	0%	6%	8%
Base (no of authorities)	32	28	26	22	192	300
Average s137 spend as a % of the limit	21%	19%	33%	56%	45%	31%

Base: 300 authorities which supplied this information

Use of Section 137

The research found that the level of usage of s137 over the past five years has remained stable. During 1996/97, 92% of authorities reported that they had made use of s137. The average use was 31% of the available financial limit, with 57% of authorities spending above, and 43% spending below average.

There are significant differences in the use the s137 power between types of authority. Counties and metropolitan districts were lower users of s137 in 1996/97. While 8% of all authorities reported no spend under s137, 19% of counties and 14% of metropolitan districts made no use of s137 in 1996/97. The average spend of the available financial limit was 21% for county councils and 19% for metropolitan districts, compared to an average of 31% for all authorities. Shire districts and unitary councils were larger users of s137 in 1996/97. The average spend of the available financial limit was 45% for shire districts and 56% for unitary councils.

The lower use of s137 by counties and metropolitan districts may reflect the wider responsibilities which they possess and hence their greater scope for accommodating activities within mainstream programmes. Whilst in theory, the same would apply to unitary councils, in practice, their greater use of s137 in 1996/97 does not appear to be a function of the type of authority so much as of the expenditure policies of the predecessor authorities that had responsibilities in their areas. Thus of the nine unitary authorities which provided data, in only four cases did the use of s137 increase above the pre-unitary level. Use of the available financial limit fell in three authorities and was unchanged in the remaining two.

In 1996/97, 73% of responding authorities' expenditure under s137 was accounted for by grants to voluntary and community organisations (including Citizens Advice Bureaux) and the administration of these grants. Other reported uses of s137 included economic development, planning and environmental issues, and crime prevention/community safety. Some of the declared uses of s137 are covered by specific powers. It is likely that this applies to much of the support for Citizens Advice Bureaux and some of the economic development spending.

Authorities generally adopt an unstructured approach to the identification of expenditure under their s137 powers. This reflects the fact that: expenditure under s137 is a small percentage of total spend; most authorities' expenditure is substantially below their s137 limit; the implementation of financial monitoring systems in relation to s137 spend has been patchy; the scale of expenditure under s137 is generally not material in the eyes of auditors; and there has been a lack of clear up-to-date guidance on the types of expenditure which should be included under s137.

The result is that there is a lack of consistency in the declaration of expenditure under s137 by authorities. This means that establishing the 'real' use of s137 by authorities, defined as expenditure for which no other powers exist, is not straightforward. It is estimated that the 'real' use of the s137 expenditure limit in 1996/97 by the authorities responding to the postal survey was 25%, compared to the declared figure of 31%. However, the importance of this issue should not be over-emphasised because there is no suggestion that the activities incorrectly declared as s137 expenditure were ultra vires; the issue is simply that other powers were available.

The role of Section 137

Authorities responding to the postal survey attached the greatest importance to promoting the well-being of their area and its residents as a primary role for s137. They also saw it as providing a fallback or power of last resort. Authorities did not generally regard s137 as a vehicle for undertaking new or innovative activities

Whilst few of the case study authorities emphasised the role of s137 as being the promotion of the well-being of their areas and/or residents, this probably reflects their assessment of the effectiveness of s137 in fulfilling this role.

There is a general view that s137 is of limited importance, given the scale of the expenditure limit (and the even smaller scale of actual spending) relative to their total expenditure. Many authorities indicated that the powers are 'irrelevant' to the key issues and concerns which they face. Therefore, it is not perceived as an adequate power for promoting the well-being of their areas and/or their inhabitants.

Section 137 is perceived as a 'negative' and 'grudging' power, rather than a 'positive' power to undertake a specific activity or to achieve a specific objective. However, there is a strong view amongst authorities that the powers under s137 are useful because they provide essential flexibility and, subject to the definition of the proposed new duty, should be retained.

Although most of the authorities regard the powers available under s137 as being wide-ranging, they consider that the creation of new specific powers has gradually narrowed the scope of activities which it is possible to undertake under s137. In particular, the introduction of economic development powers had exerted a major impact on the usefulness of s 137 to local authorities.

Table 2: Breakdown of s137 expenditure
Expenditure category	Expenditure under s137	Share of total s137 expenditure
Grants to other local authorities	£921,000	2%
Grants / loans to commercial undertakings	£524,000	1%
Citizens Advice Bureaux	£6,225,000	14%
Grants to other voluntary / community organisations	£24,425,000	56%
Grants administration	£1,119,000	3%
Planning / environment / Local Agenda 21	£1,801,000	4%
Economic Development	£1,771,000	4%
Crime prevention / community safety	£1,024,000	2%
Community initiatives	£1,382,000	3%
Other	£4,706,000	11%
Total	£43,928,000	100%

Base: 296 authorities providing this information in survey

Barriers to the use of Section 137

The key factor underlying the limited use currently being made by authorities of their s137 power is the availability of a wide range of primary powers. Whilst this does not represent a 'barrier' to the use of s137, its importance indicates that the spending priorities of authorities are to be found in areas where they possess primary powers, rather than in activities which are likely to be funded under s137; and these primary powers are now wide enough to accommodate most activities which authorities want to undertake.

Only two barriers to the use of s137 were identified as being of any significance: the capping of total expenditure; and the s137 expenditure limit.

Whilst authorities do not consider that s137 is currently an effective mechanism for promoting the well-being of their areas and/or their inhabitants, the evidence suggests that this is not related to restrictions on the use of the powers:

• only 13% of authorities indicated that they are being prevented from undertaking any activities under s137 by their overall financial position;
• only 7% of authorities stated that they are being prevented from undertaking any activities under s137 by the expenditure limits;
• only 9% of authorities suggested that they would spend more under s137 if the expenditure limit on its use was removed;
• only 6% of authorities stated that they would like to undertake any activities under s137 but consider that they lie outside the current powers.

Only 10% of authorities indicated that, over the past five years, they had considered funding an activity under s137 and then not done so as a result of taking legal advice. Furthermore, only three out of 296 authorities indicated that they had been subject to a legal challenge regarding expenditure under s137. Therefore, the possibility of a legal challenge is, at most, of secondary importance as a barrier to the use of s137.

The future use of Section 137

Only 23% of the authorities responding stated that they would advocate any changes to s137. The two changes most often suggested by those authorities were the replacement of s137 by a general power of competence and a removal of, or a significant increase, in its financial limit.

The absence of any significant degree of interest in s137 reflects the limited importance which authorities attach to the power and, as a result, the limited consideration which has been given to s137 over many years. In addition, most authorities consider that they have sufficient powers to support the range of activities which they are currently likely to undertake.

Whilst an overwhelming majority of authorities (83%) currently have no plans to change the level or type of expenditure made under s137, a substantial number of authorities indicated that the move towards local empowerment and community governance, not least because of the requirements of best value, could lead to an increasing role for s137 in the future.

Many authorities consider that this will lead them increasingly into areas where they are at the limits of their primary powers. Three trends, in particular, are likely to lead to this situation:

• responding to community needs in a holistic way, thus cutting across traditional service boundaries and leading to more inter-departmental and inter-agency working;
• encouraging local managers to be more innovative and to work in partnership with the community and other agencies;
• encouraging self-help by local organisations. This may lead to issues regarding the funding of local companies and trusts.

A perception that they are increasingly at the limits of their primary powers would enhance the importance of s137 and/or the proposed new duty to authorities.

Currently, considerably more emphasis is placed by authorities on other changes or clarifications to the legal position relating to their activities. Some of these have, or could have, an impact on activities funded through s137. For example, the position, and especially the liability, of councillors and officers when serving on the boards of companies and trusts is likely to be an increasingly important issue as authorities become more involved in community governance.

The proposed new duty: As noted earlier, one of the reasons why authorities do not regard s137 as an adequate vehicle for promoting the well-being of their areas is that it is perceived as 'negative' or 'grudging', rather than a 'positive' power to undertake a specific activity or to achieve a specific objective.

In contrast, the proposed new duty, in the general terms in which it was outlined in the Government's Election Manifesto, is perceived as:

• a 'positive' power;
• a statement of the confidence of central government in local authorities;
• an expression of the 'change in mood' in the relations between central and local government which has occurred over the past year.

However, most authorities raised the issue of resources. There is a concern that this could lead to a 'repackaging' of their existing activities so that they could demonstrate that they are meeting the requirements of the new duty without actually doing anything different. At worst, some authorities are concerned that the new duty will raise expectations relative to resources and lead to criticism of local authorities.

Whilst still emphasising the central importance of the resources issue, a number of authorities do envisage the proposed new duty leading to significant changes:

• some authorities see it as a useful external stimulus to the re-prioritisation of their activities and budgets;
• some authorities indicated that it would boost the confidence of:
• • members and officers in their ability to be more pro-active and innovative, especially in those areas where they are currently at the limits of their powers;
  • the community and other agencies in local authorities, and hence enhance the ability of the latter to perform the community leadership role.

Finally, authorities consider that it is important for the proposed new duty to focus on the 'how' as well as the 'what' of promoting the economic, social and environmental well-being of their areas. As noted above, a critical area in this context is the liabilities of Members and officers when serving on the boards of local companies and trusts. Authorities consider that this will become an increasingly important issue as a result of the combined effect of community governance, best value and the proposed new duty.

Further Information

'Local authority activity under Section 137, Local Government Act 1972' by Nigel Mason, Roger Turner and Michael Dodd of York Consulting (ISBN 1 85 1121 57 9), priced at £11.00 is available from the DTLR Publications Sales Centre at the address below.

Department of the Environment, Transport and the Regions, Publications Sales Centre, Unit 21, Goldthorpe Industrial Estate, Goldthorpe, Rotherham S63 9BL

Telephone: 01709 891318. Fax: 01709 881673.

For further information on the research contact:

Joe Biskupski, Local Government Research Unit, Department of the Environment, Transport and the Regions, Floor 5/D5, Eland House, Bressenden Place, London SW1E 5DU

Telephone: 0171 890 4125. Fax: 0171 890 4099. E-mail: lg3.doe@dial.pipex.com