Surprisingly, there has been a dearth of cases examining the extent of local authorities’ well-being powers. There could be many reasons for this, but it may be due partly to councils’ lack of confidence in using the power.
In 2002, in the first case of its kind, it was held that Lewisham Council had the power to provide a student (the scholarlynamed Ms Theophilus) with financial support, utilising the power bestowed by section 2(1) Local Government Act 2000 (the 2000 Act) which provides that every local authority has the power to do anything which it considers is likely to achieve the promotion or improvement of the economic, social or environmental well-being of its area.
The power is an inclusive one – it broadens the scope for action rather than limits it, and includes giving financial assistance to any person. Indeed, the explanatory notes to the 2000 Act state that it allows local authorities to undertake a wide range of activities for the benefit of their local area and to improve the quality of life of local residents, businesses and those who commute to or visit the area. It is a power of first resort and, rather than searching elsewhere for a specific statutory power in order to take a particular action, councils can instead look to the well-being power in the first instance. Whilst councils do not have carte blanche to do exactly as they like, as long as there is no statutory prohibition, restriction or limitation preventing the action being carried out, Parliament has sent out a strong message that councils should have a free rein when acting for the good of their communities. Or so it seemed before the case of R v Risk Management Partners Limited ex parte The Council of the London Borough of Brent and the London Authorities Mutual Limited and the Council of the London Borough of Harrow. Brent Council bravely decided it wished to participate, with a number of other London authorities, in a mutual insurance company, London Authorities Mutual Limited (LAML). This was for the purpose of providing insurance for itself and the other authorities as a direct and innovative reaction to the limited number of local government insurance providers in the marketplace, with the aim of saving money for the public purse. When deciding, the council should have done so with the expansive well-being power in mind. Instead, it chose to rely on the old “incidental” power under section 111 Local Government Act 1972. It can certainly be commended for seeking to promote the Government’s shared services/joint working agenda.
Unfortunately for Brent, its good intentions were thwarted when a claim for judicial review of the council’s decision was brought by Risk Management Partners Limited in April 2008, prior to a subsequent hearing in May arising out of the same private company’s action to challenge the council’s procurement process. Lord Justice Stanley Burnton held that, whilst the obtaining of insurance was clearly incidental to the council’s functions, the provision of insurance to others was not, and the council acted beyond its powers under section 111(1). He applied those two well-known chestnuts of local government case law, namely McCarthy and Stone (Developments) Limited v Richmond-on-Thames LBC  (now discredited) and Credit Suisse v Allerdale BC , proclaiming that the participation in the insurance company went beyond the incidental – indeed it was “incidental to the incidental” and therefore ultra vires as Brent could not provide financial assistance to LAML to do what it, the council, could not do.
The judge then turned his attention to the well-being power, upon which Brent also sought to rely, and considered whether it had played a part in the council’s decisionmaking process when deciding whether to participate in the mutual insurance company. Curiously, he reflected on the breadth of the powers available, stating that “both section 111 and section 2 should be given sensible and liberal interpretations and applied generously”. Unfortunately, he then proceeded to apply a restrictive and uncertain approach which has surprised many in light of the preceding case law, the explanatory notes to the 2000 Act, and the guidance issued by the Secretary of State. He focused on the evidence and held that the council had not formed the requisite opinion at any stage on whether participation in LAML would promote or improve the economic, social or environmental well-being of its area.
For the wider question of whether councils can use section 2 to participate in mutual insurance companies, Burnton LJ merely scratched the surface when he considered this important conundrum. He thought that in principle section 2 could give authorisation to enter into a contract with a mutual insurance company and to provide guarantees and financial assistance. Rather disappointingly, he chose not to delve much deeper, however it is a cautious green light for local authorities to use the well-being power in these circumstances if there is confidence that in doing so, the risks can be managed so as to deliver an economic benefit to their area. Brent was clearly motivated to cut costs, an admirable motive in these cash-strapped times, but that was held not to be a sufficient reason to underpin the well-being power. But why should an authority be prevented from using the power in imaginative ways to deliver real value to its community, as long as it abides by the relevant statutory controls? Narrow interpretations should have been dispensed with long ago to avoid appearing counter-productive in this supposedly innovative age.
This case is of such importance, it will be interesting to see what happens at the next stage now that Brent, Harrow and LAML have already commenced appeal proceedings. Let’s hope that a staunch, liberal interpretation will be favoured over ambivalent uncertainty by the Court of Appeal and we can once again put our faith in the power of well-being.