19 June 2009 | Paul Snell
The Court of Appeal has dismissed Brent Council's request to overturn a ruling that stopped it from setting up and participating in an insurance buying mutual.
The court upheld last year's High Court verdict, which found Brent breached procurement rules when it abandoned its tender process for an insurance provider and joined insurance buying group London Authorities Mutual Limited (LAML) (News, 19 June 2008).
The ruling has in effect shut down LAML, but it will honour existing commitments. Brent is deciding whether to appeal the latest ruling.
LAML said the result was a "serious blow to local authorities' attempts to deliver efficiencies".
Chairman Nathan Elvery said: "There will be unease about the extent of local authority power."
Brent, with the support of LAML, tried to use the "Teckal" exemption, which allows an authority to avoid procurement regulations if it has sufficient control over the organisation it awards the contract to.
However, the court said the exemption "could not be relied upon as an excuse for failure to comply".
It added there was "an air of unreality about the notion that a public body can obtain insurance from one of its own departments".
Simon Taylor, partner at Wragge & Co, said the decision was not the end of shared services deals, but authorities would likely concentrate on smaller arrangements in future.
The New Local Government Network thinktank described the judgement as a "body blow for innovative local authorities trying to save taxpayers' money". It also urged the government to stop good work being wasted.