Executive and non-executive decisions in the light of Doncaster

The Court of Appeal has recently considered the extent to which full Council can use its budget-setting powers to constrain how the Executive must operate a particular service.

The grand scheme of the Local Government Act 2000 was that a Council would set the Budget and strategic policies, and the Executive would have the freedom to manage the authority's services within that Budget and Council-approved policies, with the Council's Overview and Scrutiny Committees holding the Executive to account. In R (Buck) v Doncaster MBC [2013] EWCA Civ 1190 (8 October 2013), the Court of Appeal concluded that the Council could not dictate how the Executive should operate a particular service by requiring the Executive to spend all the money which it provided for that service. However, the particular facts of the Doncaster case mean that the judgment still leaves a few questions unanswered.

Facts

In this case, the directly elected Mayor of Doncaster put up to Council for approval his estimates of expenditure and draft Budget for the coming year. His estimates assumed that he would be able to replace employed staff with volunteers in 12 branch libraries and close two branches entirely. The savings from these changes were reflected in his draft Budget. The full Council accepted an amendment, such that the Council-approved Budget included a "contingency sum" to cover the cost of keeping the two endangered branches open. Following the Council meeting, the Mayor stated that he had no intention of calling on the contingency fund, and that he intended to proceed with the planned closures.

Mrs Buck, a regular user of the libraries, applied to the court for a declaration that the Mayor's refusal to implement the Budget amendment was unlawful and that effectively that he was bound to spend the money provided by Council. She lost in the High Court and the matter has now been considered by Court of Appeal.

Executive decisions

The division of local authorities into Council and Executive required a clear statutory definition of their respective roles and responsibilities. This was achieved by s.13 of the Local Government Act 2000 (now s.9D as inserted by the Localism Act 2011), which provides that all functions of the authority are to be the responsibility of the Executive unless they are specified in statute or regulations as being "non-executive functions", in which case they rest with Council. The key regulations are the Local Authorities (Functions and Responsibilities) (England) Regulations 2000, which provide that the function of approving the Budget rests with Council, and that the Executive's powers to run the authority's services are limited.

Where the Executive proposes to take a decision which would be "contrary to or not wholly in accordance with the authority's budget" or "contrary to a plan or strategy adopted or approved by the authority" (i.e. by Council), this is known as a "departure decision". Where a decision would be a "departure decision", the Regulations provide that the Executive has no power to take that decision, except in extreme urgency, and must refer the matter to full Council for decision.

In the Doncaster case, the Court of Appeal held that the Council's Budget amendment merely provided a contingency sum, rather than including that sum in the approved budget for library services. So it held that, on the wording of the amendment, a decision by the Mayor not to spend the contingency sum was not contrary to the approved budget for library services.  But the court then helpfully went on to consider what the position would have been if the Council had actually increased the libraries budget by the inclusion of the contingency sum.

Approved Budget

The first issue was to determine what constituted the approved "Budget". Section 31A of the Local Government Finance Act 1992 defines the Budget as "the sums which the authority estimates it will incur in the year in performing its functions", but fails to say how specific the Budget can be. If the Council could specify that its Budget was so detailed as to provide "£200 for training in the Chief Executive's Department", and the Executive were obliged to spend the full £200 and not a penny more on training staff in the Chief Executive's Department, then the Executive would effectively have lost all discretion in the manner in which it delivered the authority's services.

However, the Court of Appeal held that setting a Budget constituted the provision of the money, rather than deciding exactly where that expenditure will be incurred. From that it concluded that to be "contrary to or not wholly in accordance with the authority's budget", a decision had to result in expenditure in excess of that provided for in the approved Budget. The court went on to say that this covered both expenditure in excess of the total sums provided for in the Budget and expenditure on a particular service which is in excess of the sum provided for a particular "head of expenditure" in the Budget. Accordingly, the court held that a decision not to spend the whole of the sum allocated in the Budget to a particular "head of expenditure" would not constitute a "departure decision", and so was within the Executive's discretion.

Virement limits

It has to be said that Doncaster Council had, atypically, already ceded considerable flexibility to the Mayor by approving unlimited "virement limits", enabling the Executive to vary the approved Budget within year by viring sums from one budget head to another within the overall total. This may have influenced the court toward the view that the Council requiring the Mayor to spend up to the sums in the Budget would be contrary to public purpose in that it would prevent the Mayor from achieving savings on public expenditure even where obvious opportunities presented themselves.

In most authorities, virement limits are limited to, say, £100,000 per head of expenditure in the Budget. In authorities where the council is at odds with the Executive, the question has arisen as to how far the Council Budget may reasonably go in allocating smaller and smaller sums to more and more "heads of expenditure" and how low the Council may reasonably set the virement limits, in order to constrain the Executive. That is an issue to which the court may need to address itself another day.

One further point which the Court left unresolved was whether the difference of drafting between "contrary to or not wholly in accordance with the Budget" and "contrary to an approved plan or strategy" was significant. A proposed development would clearly be "contrary to" the Local Plan adopted by Council if it proposed a traveller site on land allocated in the Local Plan for commercial development, but not if it was simply that the Local Plan made no provision for traveller sites. The wording in relation to the Budget appears to go rather further than that. By not addressing this point directly, the Court of Appeal implicitly held that "not wholly in accordance with" does not include a deliberate underspend, but we would suggest that expenditure for which there is no provision in the Budget might also constitute a "departure".

Executive v Council conflicts

The Court of Appeal has re-asserted the freedom of the Executive of a local authority to manage services within the Budget and policies adopted by Council, stating robustly that the Executive is not required to spend up to the sum allocated by the Council for a particular service, or in total for all Council services. That is helpful in enabling the Executive to manage the authority's services efficiently and effectively. But the continuing conflict between Executive and Council, particularly where there is a directly elected Mayor, means that the Court of Appeal may yet have to return to this issue of the balance of power, to fill in a few of the points which this judgment leaves unresolved.