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Discretionary expenditure powers

Section 137 of the Local Government Act 1972

Expenditure power

  1. Section 137 of the Local Government Act (LGA) 1972 authorises a local council to spend money (subject to the statutory limit; see paragraphs 10–12 below) for the direct benefit of its area, or part of its area, or all or some of its inhabitants.
  2. Section 137 cannot be used in cases where the council has an unrestricted specific statutory power to spend money: for example under section 124 of the 1972 Act, which empowers a local council to acquire land by agreement for a statutory function or for the benefit, improvement or development of its area.
  3. Where a council has a statutory power restricted by a limitation or condition, section 137 cannot be used to evade the limitation or condition. An example of a limitation is the prohibition in section 13 of the Local Government Act 2003, which provides that a local council cannot mortgage or charge its property as security for a loan. An example of a condition is the requirement under section 5 of the Parish Councils Act 1957 that the consent of the highway authority must be obtained before a council places a public seat in a highway.
  4. Where there is a statutory prohibition on a council carrying out a particular function, section 137 cannot be used to evade the prohibition. An example is section 2(1) of the Local Government Act 1986, which prohibits a local authority from publishing material which, in whole or in part, appears to be designed to support a political party.
  5. Before incurring expenditure under the section, the council must be satisfied that there is a direct benefit to the area or part of the area, or to some or all of the inhabitants. The use of the word “some” in relation to the inhabitants means that the council cannot use the power to benefit a single individual. Help to a single individual could possibly be given from the town mayor's or chairman's allowance (if any), or by the council organising a collection from councillors and/or the public. It might also be possible for the council to give money to a charity or voluntary body to which the individual belongs, for example a local charity which provides sports facilities or supports individual sportsmen.
  6. The direct benefit accruing to the area, etc. must be commensurate with the expenditure incurred. This appears to mean that the council must not spend an excessive amount on a very narrow object (for example, spending the whole of its allowance under the section for the benefit of two or three individuals). If the benefit to the area is not commensurate with the expenditure, the expenditure could be challenged by the auditor, or by an objector at audit.
  7. Expenditure cannot be incurred on publicity for a public or voluntary body unless the expenditure is incidental to the main purpose for which the council is giving financial assistance to the body. Expenditure by a council on publicity for services it provides under section 142 (provision of information, etc. relating to matters affecting local government) is limited to the maximum under section 137.
  8. Contributions may be made to charities and bodies which provide a public service on a not-for-profit basis, but only in furtherance of their work in the United Kingdom. Contributions to UK charities and bodies providing a public service are not required to bring any direct benefit to the council’s area or to its inhabitants.
  9. Contributions may also be made to public appeals for funds in connection with particular events which directly affect UK residents, where the appeal is made by the Lord Mayor of London or the chairman of a principal council or by a committee of which the Lord Mayor or chairman is a member, or by the equivalent person in Scotland.

Expenditure limit

10. The maximum amount which a council may spend under section 137 in any one year is a prescribed sum per head of the "relevant population". The relevant population is the number of persons on the electoral roll for the town, parish or community on 1 April.

11. Certain amounts specified under sub-section 4B have to be deducted from the council’s gross expenditure for the year in order to calculate the maximum permitted expenditure under the section. These include amounts paid by principal authorities under section 137 to parish and community councils.

12. The maximum amount which may be spent in any one financial year is calculated in accordance with Schedule 12B to the 1972 Act (inserted by the LGA 2003). The basic amount of £5 per elector was set at 1 April 2004, with subsequent annual amounts being calculated by reference to the movement of the retail prices index. The maximum amount for 2019–20 is £8.12 per elector in both England and Wales.

Authorisation of expenditure and accounts

  1. Expenditure under section 137 must be authorised by resolution.
  2. A separate account must be kept of expenditure under the section.

Grants and loans to voluntary bodies, charities, etc.

15. Under section 137A a council which gives financial assistance (by way of grant or loan) equal to or exceeding the "relevant minimum" to a voluntary body, or to a charity or not-for-profit public service body, must require the body or charity to provide a written statement of how the money has been spent, within 12 months after the assistance has been given. The "relevant minimum" is £2,000 in England and £5,000 in Wales. In practice, a council would be well advised to require the charity or other body to provide a copy of its accounts showing the receipt of the council’s contribution whatever the amount. It would also be good practice to require a body or charity to provide a financial statement or accounts before a grant or loan is given.

The power of general competence – England only

16. Part 1 of the Localism Act 2011 provides for local authorities to have a general power of competence. Section 1 of the Act gives principal authorities and “eligible” parish councils in England a power to do anything that generally individuals can do. The power (with some restrictions; see below, paragraph 20) can be exercised in any way whatever, including:

(a) anywhere in the UK or elsewhere;

(b) for a commercial purpose or otherwise for a charge, or without charge: and

©  for, or otherwise than for, the benefit of the authority, its area or persons resident or present in its area.

The generality of the power is not limited by the existence of any other power of the authority which (to any extent) overlaps the general power.

Eligible parish councils

17. A parish council (but not a parish meeting of a parish where there is no parish council) is eligible if it comes within the compass of the Parish Councils (General Power of Competence) (Prescribed Conditions) Order 2012 (SI 2012/965). The Order lays down the following conditions for eligibility:

  1. The council has resolved at a meeting of the council and each subsequent relevant annual meeting that it meets the conditions in paragraph 2 below.
    1. (1) At the time a resolution under paragraph 1 is passed:

(a)       the number of members of the council that have been declared to be elected, whether at ordinary elections or at a by-election, is equal to or greater than two-thirds of the total number of members of the council;

(b)       the clerk to the parish council holds:

       (i) the Certificate in Local Council Administration;

       (ii) the Certificate of Higher Education in Local Policy;

       (iii) the Certificate of Higher Education in Local Council Administration or

       (iv) the first level of the foundation degree in Community Engagement and Governance awarded by the University of Gloucestershire or its successor qualifications; and

©       the clerk to the parish council has completed the relevant training, unless such training was required for the purpose of obtaining a qualification of a description mentioned in paragraph (b).

2 (2) For the purposes of this paragraph, “relevant training” means training:

(a)      in the exercise of the general power; or

(b)      provided in accordance with the national training strategy for parish councils adopted by the National Association of Local Councils (NALC), as revised from time to time.

18. A parish council which has adopted the general power of competence cannot also incur expenditure under section 137 of the LGA 1972.

19. The power to promote well-being enacted by the LGA 2000 is repealed so far as England is concerned.

Limits on the general power

20. Section 2 sets out the boundaries of the general power, requiring local authorities to act in accordance with statutory limitations or restrictions. Limitations that apply to existing powers that are overlapped by the general power are applied to the general power. So, for instance, if an existing power requires a particular procedure to be followed, the same procedure will apply to the use of the general power to do the same thing. It also applies any express prohibitions, restrictions and limitations within primary or secondary legislation to the use of the general power. A distinction is drawn between restrictions in pre-commencement legislation and those in post-commencement legislation. Restrictions in post-commencement legislation will only apply to the general power where they are expressed to do so. The general power does not enable a local authority to make arrangements for the discharge of its functions or for governance beyond what is permitted under the Local Government Acts 1972 and 2000.

21. Section 3 restricts the ability of a local authority to charge for providing a service to a person using the general power, or where they are using an overlapped power. Local authorities can charge up to the full cost of recovery for discretionary services. Section 93 of the LGA 2003 gives relevant authorities – including parish and community councils and parish meetings – power to charge for discretionary services related to specific statutory functions.

22. Section 5 enables the Secretary of State:

  • to remove or change statutory provisions that prevent or restrict use of the general power;
  • to similarly amend or repeal, etc. legislation to remove overlaps between the general power and existing powers;
  • to restrict what a local authority may do under the general power or to make its use subject to conditions.

Promotion of well-being – Wales only

23. Principal authorities and community councils in Wales have the power, set out in the LGA 2000, to do anything which they consider likely to achieve one or more of the following objects:

(a) the promotion or improvement of the economic well-being of their area;

(b) the promotion or improvement of the social well-being of their area; and

©  the promotion or improvement of the environmental well-being of their area.

  1. The power may be used:
  • to incur expenditure;
  • to give financial assistance to any person;
  • to enter into arrangements or agreements with any person;
  • to facilitate or coordinate the activities of any person;
  • to exercise on behalf of any person the functions of that person; and
  • to provide staff, goods, services or accommodation to any person.

25. The power may not be used in contravention of any prohibition, restriction or limitation on the powers of local authorities contained in enactments, whenever passed. The Welsh Ministers (i.e. the First Minister and other ministers in the Welsh Assembly government appointed by him) have power to impose further limitations.

26. In exercising the power, a local authority (i.e. a principal council and a community council) must have regard to the community strategy for its area.

27. Every principal authority must have a local well-being plan for its area, prepared in accordance with the Well-being of Future Generations (Wales) Act 2015. Detailed guidance for community councils can be found in the Welsh Government publication Shared Purpose: Shared Future. Statutory guidance on the Well-being of Future Generations (Wales) Act 2015. The guidance can be viewed on the Welsh Government website at www.gov.wales.

 

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Written by Paul Clayden, expert in local council law

As appeared in Clerks & Councils Direct, July 2019

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