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local authorities to do anything which they consider is likely to promote or
improve the economic, social or environmental wellbeing of their local com-
munity. (See as to the extent of this power R (Theophilus) v Lewisham London
Borough Council [2002] EWHC 1371, [2002] 3 All ER 851 and Howell, ˜Section
2 of the Local Government Act 2000™ [2004] Judicial Review 72.) The position
in Scotland is broadly similar, as is outlined in the following extract.


Chris Himsworth, ˜Local government in Scotland™, in Aileen McHarg
and Tom Mullen (eds), Public Law in Scotland (2006), pp 159“60

Turning to the actual powers of local authorities, the UK tradition has been for these to be
enumerated “ often with a high degree of specificity “ in statutes relevant to a particular
functional sector. Thus, an authority™s education powers are currently contained in the
Education (Scotland) Act 1980 (as amended and supplemented . . .). An authority™s planning
powers are contained in the Town and Country Planning (Scotland) Act 1997 (as amended)
and so on. Much of this legislation continues to be contained in pre-devolution Westminster
statutes, but increasingly supplemented or replaced by Holyrood Acts. Only a relatively small
number of local authorities™ powers are set out in the Local Government Acts themselves
although their important general powers to make by-laws for their areas are, for instance,
contained in the Local Government (Scotland) Act 1973 . . .
Under section 69 of the Local Government (Scotland) Act 1973 a local authority has ˜the
power to do anything . . . which is calculated to facilitate, or is conducive or incidental to,
the discharge of any of [its] functions™. Whilst conferring a degree of statutory flexibility,
section 69 does not confer the power to go beyond the powers otherwise laid down. In
particular, it does not confer a ˜general competence™ to do things thought by an authority to
be in the interests of its area . . .
[S]ection 20 of the Local Government in Scotland Act 2003 . . . enables a local authority
˜to do anything which it considers likely to promote or improve the well-being of (a) its area
and persons within that area; or (b) either of those™. The power to advance well-being is
further defined to include the power to incur expenditure, give financial assistance to any
person, enter into arrangements or agreements, co-operate with, or facilitate or co-ordinate
the activities of any person or exercise functions on behalf of a person, or provide staff,
goods, materials, facilities, services or property . . . The use of the power is subject to the
need to have regard to guidance provided by the Scottish Ministers. There are also a number
of specific restrictions on the use of the power, including a prohibition on doing something
forbidden by another enactment or to impose charges for the delivery of services such as
schools, libraries and fire fighting.
256 British Government and the Constitution


(ii) By-laws
District councils and London borough councils have a general power under
section 235 of the Local Government Act 1972 to make by-laws ˜for the good
rule and government™ of the district or borough and for ˜the prevention and
suppression of nuisances therein™. (The equivalent power for local authorities
in Scotland is the Local Government (Scotland) Act 1973, section 201.) In addi-
tion, speci¬c powers to make by-laws are given to local authorities by a variety
of other statutes. By-laws have to be con¬rmed by the minister responsible
for the matters to which the by-law relates: approval is not given, for instance,
for by-laws which attempt to deal in general terms with essentially national
issues or which con¬‚ict with government policy (see Home O¬ce Circular
25/1996). Government departments issue model by-laws for the guidance of
local authorities, and since the models embody the experience of many years
and are widely followed they constitute in e¬ect a body of common local gov-
ernment law. It has been remarked that ˜a by-law in the form of the model is
unlikely to be upset in the courts™ (SH Bailey (ed), Cross on Principles of Local
Government Law (3rd edn 2004), para 6“05). By-laws, like other acts of local
authorities, must be within the powers conferred. They must also be consistent
with the general law and must not be unreasonable or uncertain. (For examples
of by-laws held to be invalid because unreasonable, see Arlidge v Islington Corpn
[1909] 2 KB 127 and Nicholls v Tavistock Urban District Council [1923] 2 Ch 18;
and cf Kruse v Johnson [1898] 2 QB 91. On the test for uncertainty see Percy
v Hall [1997] QB 924.)

(iii) Ultra vires and judicial control
The act of a local authority is ultra vires and unlawful if it goes beyond the
powers conferred, as in Attorney General v Fulham Corpn [1921] 1 Ch 440,
where the corporation undertook a laundry service, washing clothes for resi-
dents in its area, although authorised by statute only to provide a wash-house
where persons could wash their own clothes. An authority may also be found to
have acted ultra vires if it has disregarded statutory requirements, as by non-
observance of a duty of consultation (Re Westminster City Council [1986] AC
668) or, as in R v Somerset County Council, ex p Fewings [1995] 3 All ER 20,
where the authority™s decision was reached on moral grounds without any
regard to the statutory criteria that should have been applied (compare this last
authority with Adams v Scottish Ministers, above, p 206).
In addition the act of a local authority may be unlawful if, although appar-
ently covered by statutory authority, it is vitiated by any of the following factors
(which may overlap): (1) bad faith (Cannock Chase District Council v Kelly
[1978] 1 WLR 1; R v Derbyshire County Council, ex p Times Supplements Ltd
[1991] COD 129); (2) irrationality, or something that no reasonable authority
would have done (Associated Provincial Picture Houses Ltd v Wednesbury Corpn
[1948] 1 KB 223; West Glamorgan County Council v Ra¬erty [1987] 1 WLR 457);
(3) misuse of the power for an improper purpose (R v Lewisham London
257 Devolution and the structure of the UK


Borough Council, ex p Shell UK Ltd [1988] 1 All ER 938; Porter v Magill [2002]
2 AC 357); (4) reliance upon extraneous or irrelevant considerations, or failure
to take account of relevant considerations (Roberts v Hopwood [1925] AC 578);
(5) failure to proceed fairly or in accordance with natural justice in relation
to individuals a¬ected by the action (R v Liverpool Corpn, ex p Liverpool Taxi
Fleet Operators™ Association [1972] 2 QB 299); (6) abuse of power in frustrating
a legitimate expectation (R v North and East Devon Health Authority, ex p
Coughlan [2001] QB 213).
All these factors are relevant to the exercise of discretionary powers by public
authorities in general (see further chapter 10), and together they provide a for-
midable array of weapons for challenging o¬cial action. The courts have,
however, often said that it is not their function to substitute their own view
of what is good policy or sound administration for that of an elected local
authority. (See eg, Pickwell v Camden London Borough Council [1983] QB 962
and Puhlhofer v Hillingdon London Borough Council [1986] AC 484.)
Local authorities, being public authorities in terms of the Human Rights Act
1998, cannot lawfully act in a way which is incompatible with a ˜Convention
right™ protected by that Act. (See further Leyland, ˜The Human Rights Act and
local government™ (2003) 54 NILQ 136.)
In some cases the courts have held local authorities to be constrained, in deci-
sions involving the expenditure of money, by a duty “ commonly if dubiously
characterised as a ˜¬duciary™ duty “ owed to local taxpayers (formerly ˜ratepay-
ers™). For instance, in Prescott v Birmingham Corpn [1955] Ch 210 the Court of
Appeal decided, on this principle, that the Corporation™s scheme of free travel
facilities for old people in the city was ultra vires and illegal. Although the
Corporation was authorised by statute, in operating its passenger transport
service, to charge such fares as it thought ¬t, it was held that it owed a duty to
its ratepayers to run the undertaking ˜on business lines™ and was not permitted
to confer rights of free travel ˜on any class or classes of the local inhabitants
appearing to them to be deserving of such bene¬ts by reason of their advanced
age and limited means™. (The e¬ect of this restrictive decision was removed,
in respect of local public transport service undertakings, by the Public
Service Vehicles (Travel Concessions) Act 1955; see now the Transport Act 1985,
ss 93“105.)
The principle of a ¬duciary duty to ratepayers was again invoked in Bromley
London Borough Council v Greater London Council [1983] 1 AC 768. The GLC,
in implementing an election manifesto promise of its Labour majority to cut
London transport fares by 25 per cent, paid a subsidy to the London Transport
Executive (LTE), which then ran London™s buses and tubes, to enable it to make
the reduction. To raise money for the subsidy the GLC issued a supplementary
rate precept to the London boroughs, to be met from additional rates, and
this decision was challenged by the Bromley council. The House of Lords ruled
that the GLC, in exercising in this way its discretionary power under the
Transport (London) Act 1969 to make grants to the LTE, had acted ultra vires
258 British Government and the Constitution


and unlawfully. Their Lordships held that the Act required the GLC to strike a
fair balance between users of London transport and the ratepayers from whose
resources any subsidy would be supplied. The GLC, in the view of the House,
had failed properly to strike this balance in introducing low fares without due
regard to ratepayers™ interests or the requirement of the Act that the LTE should,
so far as practicable, break even in its operations. In reaching this conclusion
their Lordships interpreted the Act as requiring that London transport should
be run on business principles, not for objects of social policy, and placed a
strong emphasis on the GLC™s ¬duciary duty to ratepayers, interpreting provi-
sions of the Act as being implicitly quali¬ed by this duty.
The reasoning of the ¬ve Law Lords in the Bromley case di¬ered markedly in
detail, in interpreting a statute which was by no means explicit as to the extent
of the GLC™s power to pay revenue subsidies to the LTE. ˜It is very remarkable™,
said one commentator, ˜that there is such a range of interpretation from a
court from which there is no appeal™ (Foster, ˜Urban transport policy after
the House of Lords™ decision™ (1982) 8(3) Local Government Studies 105, 111).
Moreover the concept of a ¬duciary duty to ratepayers is more problematic
than was realised in this and other cases in which it has been pressed into
service. (See further Foster, above; P Craig, Administrative Law (5th edn 2003),
pp 557“9; Dignan, ˜Policy-making, local authorities and the courts: the “GLC
fares” case™ (1983) 99 LQR 605; Gri¬th, ˜Judicial decision-making in public law™
[1985] PL 564, 575“82.) The courts have acknowledged that local authorities
also owe duties to other classes of residents “ for example, to transport users “
and must themselves balance one duty against the other. But this discretionary
judgement is subject to judicial control, and a policy which may appear to a
local authority to contribute to social welfare and an improved urban environ-
ment (and to be justi¬ed by an election manifesto commitment) may seem to a
judge to be ˜a hasty, ill-considered, unlawful and arbitrary use of power™:
Watkins LJ in the Bromley case (at 796). (Cf the response of the Divisional Court
in the subsequent cases of R v Merseyside County Council, ex p Great Universal
Stores Ltd (1982) 80 LGR 639I; R v London Transport Executive, ex p Greater
London Council [1983] QB 484; Pickwell v Camden London Borough Council
[1983] QB 962.)
The ¬duciary principle is anachronistic and incoherent. It is of little help in
marking out the limits of lawful action by local authorities. (See generally
M Loughlin, Legality and Locality (1996), ch 4.)
In a number of cases the courts have had to consider the relevance of ¬nancial
resources in decision-making by local authorities. Whether an authority may
take resources into account is a matter to be decided on interpretation of the
relevant statute. In general we may say, following Lord Browne-Wilkinson in R
v East Sussex County Council, ex p Tandy [1998] AC 714, 749, that if Parliament
has imposed a duty, rather than a power, on a local authority, requiring it to do
certain speci¬c things, the authority may not avoid performing the duty on the
ground that other objects have a greater claim on its limited resources. To
259 Devolution and the structure of the UK


permit this would be ˜to downgrade a statutory duty to a discretionary power™.
If, on the other hand, the authority is given a discretionary power by statute, it
has itself to decide whether and how to exercise the power and may take account
of cost and of the resources available to it, subject to any statutory constraints
and to ˜reasonableness™ in the Wednesbury sense (on which see chapter 10). See
further R v Cambridge Health Authority, ex p B [1995] 1 WLR 898; R v
Gloucestershire County Council, ex p Barry [1997] AC 584; R v Birmingham City
Council, ex p Mohammed [1999] 1 WLR 33; R (G) v Barnet LBC [2003] UKHL
57, [2004] 2 AC 208. (See further Alder, ˜Incommensurable values and judicial
review: the case of local government™ [2001] PL 717.)


(c) Central-local government relations
Part of the constitutional importance of local government is that power in the
state is dispersed: the autonomy of local authorities, answerable to their own elec-
torates, is a counterweight to the authority of Whitehall. On the other hand
central government, ever since it assumed a responsibility for economic progress
and social welfare, has laid claim to the support of local government for national
policies and has intervened to maintain uniform standards in local services.
Since we have no written constitution which ¬xes the boundary between
central and local government, it can be shifted by the actions of successive gov-
ernments so that, as George Jones and John Stewart say (The Case for Local
Government (1983), pp 110“11), ˜Apparently minor and administrative changes
can accumulate into a fundamental constitutional change, unnoticed until too
late™. The Widdicombe Committee showed an awareness of this danger in
warning that ˜care is needed before taking decisions which, singly or cumula-
tively, might alter local government™s status in the political system. This need is
increased rather than diminished by the lack of a written constitution™ (The
Conduct of Local Authority Business, Cmnd 9797/1986, para 3.51). Both Labour
and Conservative governments have extended central control over local author-
ities, and this trend accelerated after 1979 with an avalanche of legislation
a¬ecting the resources, functions and powers of local authorities and, in its
cumulative e¬ect, signi¬cantly reducing local autonomy.
A ¬‚ourishing local democracy requires that elected authorities should have
substantial freedom to raise and spend money in the interest of their local com-
munities, but in the 1980s and 1990s central government took ¬rm control of
local government ¬nance. At the present day local discretion in making spending
decisions is limited by the fact that only about a quarter of local government
income is raised by local authorities through the council tax. The rest (apart from
a relatively small amount from charging for services) is provided by central
government in grants (a general revenue support grant and speci¬c grants, some
of these being ˜ring-fenced™) and through distribution of the national business
rate. The determination of the grant depends largely on the central government™s
assessment of local expenditure needs. In addition, the raising of revenue by local
260 British Government and the Constitution


taxation has been restricted by a series of enactments designed to limit local
government expenditure. A ˜capping™ regime, applied initially to local rates and
afterwards to the community charge or ˜poll tax™ and then to the council tax,
enabled central government to prevent local authorities from setting levels of tax
regarded as ˜excessive™. Central government controls have also been applied to
local authority borrowing and capital ¬nance. Measures of these kinds con¬rmed
the ¬nancial hegemony of central government. The Labour Government brought
about a modest increase in the ¬nancial freedom of local authorities, in particu-
lar through the abolition of universal ˜capping™ (while retaining more ¬‚exible
reserve powers to limit increases in council tax). (See Modern Local Government,
Cm 4014/1998, chs 5, 9 and 10, and the Local Government Act 1999.) More
radical changes in the system of local government ¬nance, giving greater freedom
to local authorities “ in particular those identi¬ed as ˜high performing™ “ were
proposed in the Government™s White Paper, Strong Local Leadership: Quality
Public Services (Cm 5327/2001), ch 6 and implemented by the Local Government
Act 2003.
This Act (applying in general to both England and Wales, as agreed with the
Welsh National Assembly) increased the power of local authorities to raise
¬nance for capital expenditure without government consent, setting their own
˜prudential™ borrowing limits, and provided new freedoms to trade and charge
for services and greater local discretion in making investments. The Act also
enables any minister to make a grant to a local authority for any purpose, with
the consent of the Treasury. Some central government controls remain in place
but in general are relaxed. The Secretary of State is given power to ¬x the
minimum allowance for reserves to be made by local authorities in setting
their budgets. The Government has since introduced a system of ˜three-year
settlements™ “ allocations of local authority revenue and capital funding on a
three-year forward basis, intended to provide greater certainty so as to facilitate
local ¬nancial planning and management.
The arrangements for local government funding remain under review. The
Government has established an independent inquiry, led by Sir Michael Lyons,
to consider the case for changes to the present system of funding, in the context
of the changing role of local government in providing services to the commu-
nity (see www.lyonsinquiry.org.uk).

Memorandum by the Local Government Information Unit: Evidence
to the Housing, Planning, Local Government and the Regions
Committee, HC 402-II of 2003“04, p 14
Finance is an integral part of the wider debate on the status, role and purpose of local
government. If central government perceives local government to be primarily an agent for
delivering national services, with a limited wider role, it will not consider that local govern-

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