By Tash Shifrin
12th June 2009
Local government figures have called on ministers to change the law after the Court of Appeal ruled that a group of London councils did not have the legal powers to set up an insurance mutual.
In a June 9 ruling, the court found in favour of commercial insurance firm Risk Management Partners in its case against the London Borough of Brent – one of the founding members of London Authorities Mutual Limited.
It ruled that the participation of local authorities in an insurance mutual was beyond their statutory powers under the 1972 and 2000 Local Government Acts. The court also ruled that Brent had awarded its insurance contracts to Laml in breach of the 2006 Procurement Regulations.
Laml said it would cease its underwriting activities immediately and run down its work, ‘pending any fresh legislation’.
The mutual’s chair, Nathan Elvery, who is deputy chief executive at the London Borough of Croydon, said the outcome was ‘very disappointing’ for the mutual. He said it had aimed to offer savings of up to 15% on councils’ insurance spend.
Elvery suggested the ruling was ‘contrary to assurances we have received from central government that the wellbeing powers were sufficient for our purposes’. He also called on ministers ‘to do what they said they would do and urgently clarify the powers that are available to local authorities’.
He added: ‘Taxpayers may well ask why we have legislation which prevents local authorities innovating, sharing costs and pooling risk to save public money, when this is a standard way for municipalities to organise their insurance affairs in countries such as the US, Canada, Australia and Scandinavia.’
He was backed by New Local Government Network director Chris Leslie, who said: ‘Unless ministers act immediately and amend the current Local Democracy, Economic Development and Construction Bill to clarify that councils do in fact have the power to join forces and save money, then we will suffer inefficiencies and lack of ambition for years to come.’
RMP’s managing director Kaz Janowicz, said: ‘For us it was always a question of having a level playing field in the procurement process.’
Describing Laml as ‘a speculative venture’, he added: ‘Is it really for local authorities to get involved in running an insurance company with all the risk that involves? Is that the proper use of taxpayers’ money?’
