Ministers amend Bill to legalise mutual insurers

15 Oct 09
A last-minute legislative amendment to allow councils to set up mutual insurance schemes has been welcomed by campaigners
A last-minute legislative amendment to allow councils to set up mutual insurance schemes has been welcomed by campaigners, who called for further action to open up wider use of their 'wellbeing' powers.

Ministers submitted an amendment to the Local Democracy, Economic Development and Construction Bill on October 12 in an effort to rescue the concept of mutual insurance funds.

The move followed a Court of Appeal ruling in June that blocked a pioneering scheme.
The court ruled that councils' participation in London Authorities Mutual Ltd was beyond their statutory powers to promote the economic, social and environmental wellbeing of their areas. Last month, Laml was forced into provisional liquidation.

Local government minister Rosie Winterton said the amendments were aimed at ensuring schemes like the London mutual could go ahead in future in 'Best Value' authorities.

Laml chair Nathan Elvery, who is deputy chief executive at the London Borough of Croydon, welcomed the move to correct ‘the apparently perverse appeal court ruling’. He said: 'I am grateful that common sense has finally prevailed. It has been a long and frustrating journey.’

Chris Leslie, director of the New Local Government Network think-tank, added: 'The restrictive interpretation of the courts needed to be struck down and this legislative step is a very welcome move reasserting the permissive powers that councils ought to have.'

Local Government Association programme director Paul Raynes also welcomed the move, but warned that it dealt only with the specifics of setting up insurance mutuals. He told Public Finance the  judgement 'effectively blew the wellbeing powers out of the water', signalling that the courts could  prevent innovative uses of the powers.

Raynes called on the government to 'restore the policy intention' behind the wellbeing power, which ministers have claimed will allow councils to take wide-ranging economic, social and environmental initiatives. Ministers ‘should legislate to reinstate the breadth of the power they thought they had introduced’ rather than take a piecemeal approach, he said.

‘Is the government’s policy to have a wellbeing power, or to introduce a couple of pages of legislation every time there’s a difficult court judgment?’

The LGA, which is seeking a clear ‘power of general competence’ was now working with legal experts to see how such legislation could be drawn up, Raynes added.

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