Local government lawyers are to draft a new ‘power of general competence’ to give local authorities greater freedom to act independently of central government to improve the economic, social and environmental wellbeing of their areas.

The new power of general competence is intended to complement the existing wellbeing power, introduced through the Local Government Act 2000, which because of its complexity has been little understood outside legal circles and which only 8% of local authorities have taken up.

The demand for a new power arose from the failure of London Authorities Mutual Limited (LAML), a collaborative scheme set up under the wellbeing power to improve the efficiency of councils’ insurance arrangements and save costs. LAML had to cease trading when the Court of Appeal ruled that certain London authorities could not lawfully participate in the scheme and had breached procurement rules.

Stephen Turner, vice-president of the Solicitors in Local Government group, said the failure of LAML was disappointing, particularly given that it was the first time the wellbeing power had been tested in court. ‘The LAML judgment was retrograde, almost returning us to the status quo of before the 2000 Local Government Act,’ he said.

However, Turner recently attended ‘wide-ranging discussions’ with local government lawyers and the Local Government Association (LGA) about the future shape of the competence power. ‘We started from basics,’ he said. ‘Is a power of general competence needed and is this the right time to advance it? ... Both the lawyers and the LGA favoured developing a new power,’ he said.

Jo Dungey, an LGA senior policy consultant, said the LGA has a long-standing history of advocating a power of general competence. ‘The aftermath of LAML has undermined councils’ confidence in wellbeing, but we are keen to create a situation where local government has a broad general power to do the best for the community, whatever the priority – climate change, shared services or other local need. Different times and different challenges mean individual local authorities should have the flexibility to do whatever is required to improve their areas – assuming, of course, their actions are not explicitly prohibited by legislation.’

Subsequent discussions will focus on the first draft of a bill to introduce the power of general competence into local government.