The Government’s push for the largest structural reform of local government in 50 years is underway – but with reorganisation comes complex questions of liability.
On 5 February 2025 the Minister of State for Local Government and English Devolution, Jim McMahon, wrote to all councils in two-tier areas and small neighbouring unitary authorities inviting proposals for reorganisation. The Government made it clear that the sort of reorganisation it wants is the creation of new big unitary authorities - over 500,000 residents - in order to ”achieve efficiencies, improve capacity and withstand financial shocks.”
An invitation for proposals might make this initiative sound voluntary, but no one has been fooled. The Government’s English Devolutions White Paper, published in December 2024, says the Government “will facilitate reorganisation for those unitary councils where there is evidence of failure”. On 24 March Jim McMahon reported that every single area of local government that had received his invitation had responded. While the Government has yet to give the green light to any specific proposal, it seems clear that the Government’s desire for “the largest structural reform of local government in half a century” is likely to come to pass.
From a civil procedure perspective, new claims that arise from events occurring after the reorganisation are usually straightforward. The new unitary authority covering the area where the claim arises will be the correct defendant. However, claims arising from events prior to the reorganisation can be more problematic. If the reorganisation results in the dissolution of the authority that had been the correct defendant, it is essential have clarity about where the liability for the claim now lies.
If the dissolved authority covered an area contained entirely within the area covered by a new unitary, presumably the new unitary will inherit the historic liabilities of the dissolved authority.
However, this happy scenario is unlikely to be the case in every instance. It seems inevitable that to create new unitaries of sufficient size – 500,000 residents – there will need to be a significant number of boundary changes. What is the position if an authority is dissolved, and the area it covered prior to dissolution is now split between two (or more) new unitaries? Will all the historic liabilities pass to one new unitary, or be split between two or more new unitaries? And if split, what will be the basis of such a split?
Thought needs also to be given to practicalities of litigation. If the liability for a claim has passed to one new unitary, but documents relevant to the claim are held by a second, how will disclosure be managed in a way that is GDPR compliant? Furthermore, how will payments to meet historic liabilities be made? While the benefit of a dissolved authority’s insurance policies will almost certainly pass to the new unitary which inherits the liability, most local authorities have large deductibles on their claims policies. Most claims are met entirely from local authority funds.
All of these issues are solvable, and in many different ways. Each individual reorganisation will be different. However, it is essential these important issues are thought through early, and the solutions clearly recorded in documents.
For further information on this topic, please contact Chris Webb-Jenkins.
