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Charging for parking - and for other services

Local authorities are trying to raise as much income as possible but a recent decision scuppered an authority's plans to raise money from parking…

The Queen on the application of David Attfield v The London Borough of Barnet [2013] EWHC 2089

Local authorities are, for obvious reasons, trying to raise as much income as possible.  The law on charging for services has changed over the last ten years, to make this easier, but the London Borough of Barnet’s plans to raise money from parking charges were scuppered by a decision of the High Court on the 22 July.  The next day, apparently coincidentally, the LGA Chairman pressed the government for more freedom to charge for services.

Mr Attfield lives in East Finchley, in Barnet.  Like many people in outer London, residents there do not have garages or front gardens and have to park on the street in competition with commuters, so there is a controlled parking zone in his street.  The charges have increased steadily over the years, and in 2011 the Council decided to increase the charge for resident’s permits to £100 for one car, and visitor’s permits to £4.  Mr Attfield challenged the decision.

The CPZ was created under section 45 of the Road Traffic Regulation Act 1984 (the RTRA).  Under section 145 of the Greater London Authority Act 1999 the Council has to produce a plan setting out how it will implement the Mayor for London’s parking strategy.  Barnet’s plan said that charges could exceed the operational costs of the CPZ.  Under section 65 of the RTRA the income from charges is paid into a special account, and the operational costs deducted.  That account has been in surplus for many years and in 2011 the surplus stood at about £5 million.  It was used to cover part of the cost of highways investment, roads and footways, highways maintenance, concessionary fares and home to school transport.  When it decided to increase the charges, Barnet was trying to prevent this source of income decreasing (otherwise it would have had to make cuts) and to increase it, hopefully to some £7.5 million.

Section 65 lists a number of matters on which any surplus in the special account can be spent.  They include the purposes for which Barnet had, and had intended, to apply its surplus.  On that basis Barnet’s proposals were entirely legitimate. 

But there is a rather different point.  Section 122 of the RTRA imposes a general duty on local authorities exercising their powers under the Act to do so only for certain specified purposes (reflecting the common law rule that statutory powers can only be used for the purposes for which they were conferred).  Although any surplus can be applied for the section 65 purposes, earlier case law [1] had established that it is unlawful to set charges for the express purpose of creating a surplus.  In Djanogly Pitchford J had said “Charging may be justified provided it is aimed at the fulfilment of the statutory purposes which are identified in s.122 (compendiously referred to by the parties as “traffic management purposes”). Such purposes may include but are not limited to, the cost of provision of on-street and off-street parking, the cost of enforcement, the need to “restrain” competition for on-street parking, encouraging vehicles off-street, securing an appropriate balance between different classes of vehicles and users, and selecting charges which reflect periods of high demand. What the authority may not do is introduce charging and charging levels for the purpose, primary or secondary, of raising s.55(4) revenue.”  In that case, however, Westminster City Council had established that the purpose of its charges for motorcycle parking was to restrain competition and “secure an appropriate balance”, preventing the available parking space being flooded with motorcycles.  Barnet had no such excuse.  Lang J followed the same approach and quashed its decision.  Although it seems to be acceptable to plan to make a modest surplus, to provide a safety net in case income drops, Barnet is faced with the need to review its charges and a probable reduction of its £5 million surplus – effectively a cut in the funds available for highways maintenance and the like.

Perhaps Barnet were too honest.   More cunning authorities will develop a traffic management argument for their surplus, based on the need for charges which restrain competition, although this will have to be evidence based, and will be hard to justify in the context of charging people to park their cars outside their homes in suburban London.

Section 122 and the earlier case law meant that there was no need for the Court to ponder the common law position.  It was accepted that any charging decision must be Wednesbury reasonable.  It also seems probable that local authorities can only exercise an express statutory power to charge for an activity in order to cover, in broad terms, the cost of that activity.  Charging to cross-subsidise another service would be a kind of stealth tax, and the courts will come down hard on any public authority attempting to raise revenue by taxation where there is no clear power to do so.  What is meant by “activity” or “service” in this context will depend on the precise wording of the statutory power.

But what if there is no express power?  Section 93 of the Local Government Act 2003 allows local authorities to charge for providing a service if certain conditions are met.  They include the requirement that this should be a discretionary service, not one that the authority is obliged to provide, that there is no express power to charge for the service, and that “taking one financial year with another the income from charges [for providing the service] does not exceed the costs of provision”. Statutory guidance [2] suggests that income and expenditure should be forecast over a three-year period, and that the costs in question can include the cost of financing any capital investment, and an allocation of overheads and other non-chargeable central costs such as the cost of the authority’s “corporate and democratic core” functions.  There is no definition of “the service”, and there is scope for a reasonably broad approach, so that the costs could cover a wide range of service-related expenditure, not just the marginal additional cost of the particular transaction for which a charge is to be made.  So a charge for a printed museum guide can cover some of the cost of the provision of the museum, or museums generally, plus an allocation of central costs, not just the cost of printing the piece of paper that you receive.

These provisions are replicated in section 3 of the Localism Act 2011, in the context of the general power of competence contained in section 1.  The purpose of section 3 appears to be simply to extend the section 93 power to any service provided under the new general power, in so far as that may be necessary.  As section 93 does not seem to exclude charging for the provision of a service under section 1, you might wonder whether section 3 is, in fact, necessary.  This could, conceivably, matter. There is no statutory guidance on section 3, so no reference to the inclusion of other costs.  And section 3 (4) contains a qualification which is not to be found in section 93.  It says “the duty [to secure that the income from charges for the provision of the service does not exclude the cost of provision] applies separately in relation to each kind of service”.  No one knows what a “kind of service”, as opposed to a “service”, is.  You have to apply the usual improbable assumption that if Parliament enacted something it did so deliberately and knew what it was doing.  This could form the basis for an argument that charges under section 3 can only cover the cost of the particular transaction.  This argument would probably fail, though, for two reasons.  First, the purpose of section 3 (4) is most likely to prevent local authorities lumping together all the different and wholly unrelated  services which they might provide under the general power, and charging for one in order to cross-subsidise the others.  Second, if you can rely on section 93 rather than section 3, then you need not worry about “kinds of service”, and you can even argue that the absence of a similar qualification in section 93, plus the statutory guidance, indicates that a broad brush approach is appropriate. 

The basic principle remains, though.  Local authorities can only charge to cover costs, in so far as the relevant legislation permits.  Charging to cross-subsidise other services is “doing things for a commercial purpose”, commonly called “trading”, and only permitted in limited circumstances under section 95 of the Local Government Act 2003 or sections 1 and 4 of the Localism Act.  One of the requirements for trading is that it is done “through a company”, so the service in question would have to be exported to a local authority owned company, with tax and regulatory consequences.

On the day after the judgement, in an unrelated move, LGA Chairman Sir Merrick Cockerell met CLG Secretary of State at an event to review the use of the general power, promising to press for more flexibility.  A LGA press release referred specifically to the restrictions on charging.

Back in Barnet, the Council is reported as saying that it will appeal the decision, presumably seeking a judgement from a higher court that would overrule the earlier cases. The Leader of the Council said that its “pricing and spending are very much in line with other London boroughs”.  If that is right, this case will have similar implications for other authorities, and across London and elsewhere a stealth tax could become a stealth cut.

[1] Cran v Camden LBC [1995] RTR 346 and Djanogly v Westminster City Council [2011] RTR 9

[2] General Power for Best Value Authorities to Charge for Discretionary Services – Guidance on the Power in the Local Government Act 2003 (2006)