Thinking ahead
Philip McCourt and Kirtpal Kaur Aujla comment on the contractual and commercial tasks ahead for local government reorganisation.
As the interim proposals deadline for the invitation for local government reorganisation of 21st March and all of the meetings and negotiations that led up to the submissions passes us by, the various things that have been on minds all along do a shuffle in the carousel slide projector to work out what immediate thing to focus on next.
Our series of commentary articles has and will hopefully help with the menu of those things to project.
Whilst that goes on there will be the wait whilst the Secretary of State and their officials ponder the proposals and possibly refer any suggestions for district boundary changes to the Boundary Commission. After all, whilst the section 1 invitation under the Local Government and Public Involvement in Health Act 2007 that has provided the impetus for this process does not countenance any change in district or county boundaries themselves, the guidance that accompanied the invitation did flirt with that possibility for more complex boundary changes to be considered where there is a strong justification for doing so. There is then the Secretary of State’s consultation on their preferred outcomes to be gone through before confirmation and the making of an order.
As the prospect of shadow authorities and new councils becomes real, two words will start to haunt your very dreams: ‘vesting day’. This is the day it will all become real. The former councils will cease to be and the new unitary one will become the successor authority.
There are a range of transitional and supporting Regulations made under Section 14 of the 2007 Act for the purpose of supplementing the orders to come. All of these need to be studied of course, but they may be summarised in another two words: due diligence. All of the property, contracts, assets, liabilities and functions of the current (predecessor) councils will automatically vest in the corporate body of the successor council in the form and degree specified in these regulations and the subsequent order.
The gaze of the officers at least must be on their continuing duties to serve the council, just now in its successor form. That future, post vesting day, will not be unlike any other kind of corporate merger and a significant degree of the success of the new council will depend on the quality of knowledge it holds concerning the activities, commitments and assets it is picking up.
Some of this is explicit. The Local Government (Boundary Changes) Regulations 2018 spells out, for example, that a predecessor council shall supply to the shadow authority
(a) details of every relevant contract;
(b) details of every relevant action or proceeding; and
(c) such other information relating to the predecessor council's property, rights or liabilities,
as the shadow authority may reasonably request.
Perhaps this shouldn’t need to be said, but not every council about to be abolished will enter this process as a willing participant and placing the emphasis on a continuing fiduciary duty to the council in both predecessor and successor form may not be enough to gain the kind of co-operation and hard preparatory work that will be involved. One only needs look at the previous rounds of reorganisation and see where judicial reviews, both successful and unsuccessful, had an impact not just on the legislative process but on the morale, staff input and resources dedicated to the future planning of some areas compared to those who were set up and prepared for the coming events early on.
Most will have joint working groups and project planning galore to assist with this. From a legal perspective we looked in our last article at the employment issues. Here, it is about the functions, services and assets.
Disaggregating functions and services is a set of issues about how the ongoing ‘county functions’ will continue when run as a set of services by the new unitaries. In some ways this is easier in that a well-placed inter-authority agreement, such as those we have drafted previously, will allow the councils to organise themselves around one hosting the functions as a continuing or shared service for some time to come. Following which, the functions and services may be disaggregated quite quickly, after a continuing period allowing for review and development of localised approaches or, in some cases, as a shared service in perpetuity. Ten years after reorganisation, the councils of Cheshire East and Cheshire West and Chester had gone from almost 40 such hosted services to just a few strategically favourable ones.
Aggregating functions and services can be more complex, certainly in the short term. Different council cultures must come together and build just one culture. Different contracts will need to run alongside each other, on different timelines and different localised services, until they can be brought inline and be procured or insourced together; just think bin collections and then build that out from those immediate and obvious examples to all of the others.
One question to always ask is about what our future selves in the successor council would wish to know about how things are done which others may not understand without an explanation being recorded. Every council will do certain things which are individual to that council and, regardless of whether it is for the greater benefit of the authority and its area or not, it is definitely not the norm and what is taken as read by the current staff and members may not be understood by others and where the differing practices may cause confusion when the officers and members of various councils come together in their new guise. No transitional order or spreadsheet will capture these quirks that everyone has, but understanding them and ironing them out will be an important task now and for the healthy future of the successor authority.
Systems and contracts is an early issue to be addressed. Whose ICT system is the new authority to use for example, whose accounting systems? Behind this, such things as systems and methodologies of practice might seem superficially the same between the predecessor councils but, when compared, turn out to be quite different. Then scale that question up across the differing HR, payroll, CRM systems and so on, and one can see how the question becomes a significant task.
In relation to wider contracts and systems, this becomes inherently more complex where there are multiple outsourcing and joint working agreements covering overlapping issues, which is inevitable where there are several districts forming part of the new unitary Council. Add in again those functions such as housing, where there may be several areas and approaches involving predecessor authorities with and without their own stock. To complement the statutory orders, the due diligence process and review of existing contracting arrangements will form a key part of planning for what third party agreements will be appropriate in the new landscape.
Companies will be owned by each council. These will often be owned and run in different ways. The local authority trading companies will be obvious, others will not be. Some will be limited by guarantee, some for charitable purposes. Some will have a CIC for the support of certain community functions, others will be companies limited by guarantee, some of which for charitable purposes with accompanying charity schemes and some will not. There will also be the myriad of single purpose vehicle companies that may be dormant, many of which were created to sit behind PFI projects now coming to their end. It is only through the due diligence of the current predecessor councils that these can come to light and be dealt with at an early stage, before any problems emerge. Where a joint venture, there are then the partner bodies to negotiate with. Where on a county basis, to which one might add in the successor LEP functions for some, the successor councils will find themselves the joint shareholders in these councils with their neighbours. Others may find themselves the owners of companies with competing interests when trading in services, such as leisure, cctv or even crematoria provision. In each case the new councils will need to be ready to approach their new found company membership with a plan for their governance and future purpose.
Property will transfer to the new councils (charter trustee processes aside) and the council will need to think of how to best utilise this most obvious of assets, civic arguments on who and how the existing town halls and chambers are to be used aside. It is not unknown, however, for a successor council to come across several houses or a commercial property in future years that it didn’t know it owned, much to the amusement of the local paper. Again, due diligence, research and collation is essential.
Procurement will have a key role in identifying, now, what is and is not required to be procured and where the contracts to be formed can be accommodating to the expected changes. The due diligence exercise will need to consider how timelines for re-procurement of outsourced provision aligns with the vesting day timeline. All in the backdrop of authorities working against revised systems and processes further to the new Procurement Act.
Regulatory functions can exist for a while in situ but will need to align over the longer term. Planning is an example where reorganised areas have structured planning and planning committees on predecessor area basis, at least in the interim.
All of which shouts that prioritisation of these issues will be key. The only way that some (if not most) of the new councils will be able to resource these and all of the other issues to be addressed is to prioritise those that must be agreed early and put to the shadow authority (if one is to be created we hope) and those that may be held until later. Advising project managers, not just lawyers and managers, are going to be very busy indeed.
Philip McCourt is both a solicitor and chartered secretary, was first appointed a monitoring officer in 2000, is a past president of ACSeS (now LLG) and is now legal director in the Bevan Brittan local authority governance team. He, alongside David Kitson, Victoria Barman and Hannah O’Brien, provide advice on monitoring officer issues and governance, constitutions, standards and decision making matters across all forms of local authorities.
Kirtpal Kaur Aujla is a partner in the Commercial & Infrastructure department. Kirtpal advises on commercial projects and structures for the delivery of public services through the local government reorganisation process and beyond.
