Point of law - LAA law the story continues, by Stephen Cirell and John Bennett

1 Jun 06
The recent wave of primary care trust withdrawals from Local Area Agreements at short notice has highlighted the need to put LAAs on a firm legal basis. So why isn't the government doing so?

02 June 2006

The recent wave of primary care trust withdrawals from Local Area Agreements – at short notice – has highlighted the need to put LAAs on a firm legal basis. So why isn't the government doing so?

In a recent Point of Law, we argued that Local Area Agreements needed a statutory base ('Where there's a will, there's a way', January 20–26). We cited Suffolk County Council, which had been advised by leading counsel that the proposed operation of its LAA contravened public law.

The difficulty in Suffolk arose from the way the LAA was intended to operate — namely that each of the local government and health parties would contribute their share of the resources and the regional Government Office would add the government's share. This would all be paid to Suffolk council, as the 'accountable body'.

However, it was proposed that the spending decisions would be taken by a small group, comprising the leaders of the eight local authorities and the chairs of the primary care trusts, police authority and so on.

In law, there are only a very small number of bodies to which a local authority can delegate its functions under the Local Government Acts 1972 and 2000. The Suffolk group would not be one of them.

This left two options. The group could be advisory only, with all decisions being referred back to the county council to be taken formally. Alternatively, some form of contractual arrangement could be entered into, whereby the county council could contract to spend the money in accordance with the edict of the group (without this in any way fettering the council's discretion on the matter). These solutions were created to accommodate this new policy into the existing legal rules.

In the previous article, we commented that although LAAs were being described as the 'new frontier' for local government and ministers were putting huge store on them, they have no more legal foundation than any other governmental policy initiative. This means they are subject to the current public law framework, which might not fully accommodate the aims of the initiative. While this is often the case, the point here is that LAAs are seen to be so important to the future of local government generally that this seems surprising. We predict other legal problems will arise. Are ministers going to allow this key policy to be blown off course by legal difficulties that could be solved by new legislation?

In response to our piece, Dick Sorabji of the New Local Government Network wrote a letter to Public Finance saying that the last thing LAAs need is more lawyers and regulation; trust is the key ingredient and high-trust partnerships do not depend on legal rules.

In the intervening months since that exchange of views, it is interesting to have witnessed the further problems that have arisen with LAAs. In our view, these reaffirm the need for a proper legal basis and undermine further the argument that non-binding collaboration can work.

The development in question is the withdrawal at short notice of some primary care trusts from LAAs, citing NHS deficits as the reason that they could not continue to participate.

We understand that in some circumstances, this withdrawal — and of course the subsequent removal of the resources that the PCT had pledged to the LAA — has taken place at the eleventh hour, after many months of negotiation, provisional agreement and a plethora of financial planning exercises being undertaken based on projected available budgets.

There is, of course, no legal way to prevent this from happening and trust between the parties was clearly not enough. That is precisely our point. If LAAs were to be purely collaborative arrangements, then it would be expected that they would enjoy only a loose legal foundation.

But looking at the role that these bodies are supposed to perform — and the level of monies that could be running through them, often tens of millions of pounds — it seems odd that they should be left to the vagaries of informal agreement.

So if LAAs are not to be legally underpinned, what is the required status to assist them to perform that role properly? If further legal complexities are likely to arise, there is only one way to guarantee an easier path and that is for the government to put LAAs on a secure statutory footing.

That would ensure that where uncertainty arises, consideration could be given to what Parliament intended the purpose of LAAs to be and what legal rules and permissible structures would apply. They could also deal with the latest thorny issue of what happens when one or more of the participants decide to pull out the rug.

Stephen Cirell is head of local government and Professor John Bennett is a consultant solicitor with Eversheds. They are authors of Best Value law and practice, published by Sweet and Maxwell


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