Question to the Ministry of Housing, Communities and Local Government:

To ask Her Majesty's Government whether, when a local authority acts, for a fee, as a guarantor for a property transaction in which it has no other interest in a distant local authority the details of this transaction should be (1) available to the public, (2) reported in that authority's accounts, and (3) subject to permission from central government; and if so, how.

The general power of competence is provided for in section 1 of the Localism Act 2011. It gives councils confidence in their legal capacity to act for communities and is designed to allow local authorities to innovate. Prior to the 2011 Act, local authorities could only do what Parliament had provided they could do – local authorities were given discrete, often narrowly defined powers. The general power of competence was provided on the basis that local authorities would be able to do anything that an individual with full capacity might do, other than that which is specifically prohibited, with some limitations. Section 1 of the Localism Act 2011 also builds on existing powers to charge and to trade. If a local authority wishes to trade for a commercial purpose, this must be carried out through a company. Anyone has a right to request information from a public authority, including a company that is wholly owned by a public authority.

If a local authority receives a fee for services that it provides it will need to ensure that those transactions are accurately reflected in the annual financial accounts, which it is required to complete. The annual accounts should reflect requirements of the relevant accounting and reporting framework. Proper accounting practices for local authorities are set by the Chartered Institute of Public Finance and Accountancy (CIPFA). Local authorities also need to comply with legislative requirements set out in statute. One specific requirement that local authorities are required to include in their accounts concerns related party transactions. These items should be shown as a disclosure note which supplements the core financial statements. However, it will only be disclosed where the transactions are material. In addition, local authorities complete annual statistical returns of their expenditure which are submitted to MHCLG. These returns should include all income that a local authority receives throughout the year including fees and charges. The RO forms for 2017/18 can be found at the following link: https://www.gov.uk/government/statistics/local-authority-revenue-expenditure-and-financing-england-2017-to-2018-individual-local-authority-data-outturn.

If a local authority provides a service using their general power of competence, they are not required to seek permission from central Government. The Secretary of State has powers to limit local authorities use of the general power of competence, subject to Parliamentary approval of an Order.