ALMOs and Teckal

Below is an article written by Allan Donovan on the subject of ALMOs and Teckal.

In an earlier article, LAML, Roanne and ALMOs, I looked at the recent Court of Appeal decision in the LAML case, the impact of the ECJ decision in Roanne and the potential EU procurement implications for local authorities that had set up Arms Length Management Organisations (ALMOs), to manage their housing stock.

That article drew heavily upon reports about the early days of ALMOs from bodies such as the Audit Commission and what was the ODPM (now the Department for Communities and Local Government; DCLG). Various findings, particularly the view of the DCLG that ALMOs are Teckal compliant are worthy of further investigation

Firstly, clarification is required in that it is not the DCLG view that all ALMOs will necessarily be Teckal compliant but depending upon how they are established, they could be. But, query whether such an outcome is so desirable?

The 2004 ODPM guidance tells us that authorities hoping to gain additional funding to meet the targets set by the government's decent homes initiative, have three options; stock transfer (to Registered Social Landlords), PFI contracts, or establish an ALMO. Whatever the reasons, political arguments, rights or wrongs, the additional funding is not available to authorities themselves that have failed to separate their strategic and management functions. All of which begs the question; just how level is this playing field? "

The DCLG view is yet to be tested in the courts but arguing that an ALMO should benefit from a Teckal exemption is tantamount to saying that the ALMO is part of that local authority. If that is so, how can they justifiably continue to receive additional central government funding? Is it possible that this could all be part of some smoke and mirrors illusion to make it look as though the additional funding requirement of a separation of functions is being met; or could it possibly be something as simple as, well, an awful mess?

It is a situation that is not helped by the inconsistent and conflicting messages being received. Examples include:

"As it's name implies, an arms length body has a significant degree of independence from it's local authority"; "it is for local authorities to devise arrangements which best suit their circumstances"; "ALMOs are normally companies which are 100% controlled [sic] by the local authority"; "councillors serving on the ALMO board should not play a significant role in council decisions in relation to the ALMO"; "ALMOs will need to employ staff and should normally do so directly"; [Information required for a place on an ALMO programme includes]; "How the independence of the ALMO and separation from the local authority will be assured". (ODPM guidance 2004 edition).

"An ALMOs board of directors must include tenants and independent people"; "the ALMO board should be allowed the maximum possible freedom to make decisions on the housing stock and its management"; "The extent to which ALMOs can take decisions without the involvement of the council is an indication of their arms length relationship"; "ALMOs are wholly owned [sic] by the authority"; "the ALMO must comply with the council standing orders"; "One inspection report highlighted that that one ALMO was too close to the council"; "the council had not given the ALMO the necessary freedom to make decisions about the stock". (Audit Commission 2003).

In addition to the above the DCLG supplement of 2006 examined the effect of the Parking Brixen case and concluded that the decision did not affect its view that ALMOs could be Teckal compliant.

For the DCLG to conclude that an ALMO, if properly established, could be considered Teckal compliant, yet somehow still distinct enough from the local authority as to remain eligible for continued additional funding is, perhaps, not surprising. After all, if the ECJ can create what Moore Bick LJ in LAML aptly describes as; "a legal fiction" in Teckal then why should the UK government not perpetuate that fiction?

Some might argue, however, that this gives an unfair advantage to those authorities who established ALMOs over those that opted for another route. If such an argument gained momentum then, for those authorities desperately hoping that their ALMOs might be declared Teckal compliant, it could well be a case of; "be careful what you wish for". Having ones cake and eating it, springs immediately to mind and such a finding may be seen as something of a pyrrhic victory if it leads to a conclusion that if an ALMO is declared, effectively, part of the authority that established it, then they should not continue to receive additional central government funding.

Allan J. Donovan © 2009

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