New legislation could have far-reaching effects on councils’ pensions and procurement functions
The Economic Activity of Public Bodies (Overseas Matters) Bill results from the Government’s 2019 manifesto pledge to ban public bodies from imposing boycott or divestment campaigns against foreign countries and territories – singling out Israel as the focus of the legislation.
Proponents of the bill argue that this would prevent public bodies from setting their own foreign policy, while detractors describe it as illiberal and claim it could hamper action against other states, such as China.
In briefings and written evidence, the LGA has avoided the wider political issue underpinning the bill.
Instead, we have focused on the technical detail, examining how the bill may affect local authorities in practice – specifically as this relates to councils’ pensions and procurement functions.
The effects on councils highlighted in our evidence have the potential to be far further reaching than one might expect.
Chief among our concerns are clauses 4 and 5, which could prohibit councillors from expressing legitimate opinions during pensions committee meetings and lead to vexatious legal action being brought against councils.
Clause 4 bans making statements in support of boycotts and prohibits public bodies from making statements that clearly indicate that they would engage in boycotts if it were legal to do so.
If a councillor says that they, as an individual, would support a boycott, then under the new legislation publishing this in minutes of meetings could constitute an offence.
Where the individual councillor’s view is not supported by a pensions committee collectively, then it shouldn’t be a breach of the law for them to express their views.
This could stifle appropriate and proper discussion at committee meetings about investments’ risk factors: geopolitical and territorial factors are relevant to the risk of making, or retaining, certain investments.
Clause 5 enables restrictions imposed by the bill to be enforceable via judicial review and restricts the court to only accept cases where the applicant ‘has sufficient interest in the subject matter of the proposed application’.
The bill goes on to specify that such an applicant is someone ‘affected by the decision in question’.
This is one of the most concerning elements of the bill. The LGA will be seeking clarifications and amendments to protect local authorities from uncertainty, and at worst, vexatious legal actions being brought simultaneously with potential enforcement action from the proper regulator.
Usually, judicial review is a last resort, but as currently drafted, it could potentially be the first that an individual could use to complain about a decision or statement of a local authority.
This would put judges in the difficult position of having to establish whether there has been a potential breach of the law when there may have been no investigation by the proper regulator.
A lack of clarity around what constitutes ‘sufficient interest’ to make a complaint exacerbates the problem.
Does the applicant need to be a member of the pension scheme with a pension entitlement from the relevant authority? Or could being a local taxpayer in the pension fund’s area be sufficient?
Under the current drafting, it seems all could be admissible.
Having produced a briefing on the second reading of the bill and provided both oral and written evidence to the bill committee, the LGA will continue to lobby on this legislation. We hope the concerns we have highlighted with government are considered in future drafts.
- Find out more about the LGA’s work in Parliament.