Local government lawyers have raised the question of whether cash-strapped councils could use crowdfunding in order to defend cases.
The possibility was mooted at the Lawyers in Local Government’s latest weekend school, where one solicitor suggested turning to the popular platform for cases that are in the public interest, such as those related to schools.
However, another solicitor pointed out that, from the council’s finance perspective, crowdfunding could be a 'nightmare' with regard to 'how to put it on your balance sheet'.
Third-party litigation funding was also raised as another resourcing option at the event. One solicitor told delegates that her litigator colleague’s government department 'had a good case, but did not have the funds to bring it.
'We think local government should start looking at this,' the solicitor said. 'Where local authorities have got a good case but cannot get the money together to bring the case…there might be an appetite in the litigation funding market.'
The funding options were raised at a plenary session held by 39 Essex Chambers barristers Katherine Apps, Sian Davies and Fenella Morris QC, who told the Gazette that litigation funding and crowdfunding could be untapped sources to fund local government litigation.
Apps said local authorities have previously pooled resources under the Local Government Act to bring a legal challenge - for instance, HM Revenue & Customs' VAT treatment of street car parking. 'This was crowdfunding (where the crowd was local authorities) before crowdfunding became fashionable,' Davies said.
Morris added: 'Even if a local authority doesn't crowdfund for its own costs, it could encourage third-party interveners with a particular interest to intervene and use crowdfunding. The adverse costs risk of an intervener is generally lower.'
Potential issues include the treatment of the funds collected. The barristers said the funding would need not to be a disguised use of precept-making or revenue-raising powers. If a third party is heavily involved, they could be at risk of a third-party costs order. Disputes with the third-party funder could cause problems.
Schools have already used crowdfunding to raise money and online wish lists to get basic supplies such as pencils, glue and textbooks, the Guardian reported last week.
According to the National Audit Office, local authorities have suffered a 49.1% real-terms reduction in central government funding since 2010. Meanwhile they are having to cope with growing demand for key services.