Local councils are barred from marketing their services to other public or private sector bodies. The legislation forbidding trading is based on the belief that it would be unfair to private companies if, for example, councils were able to offer IT services to another council or housing management services to a property company. The unfairness stems from such factors as the absence of risk in a council compared to a company and sources of cheaper finance open to councils.The introduction last year of Best Value where councils are required to continually improve their services has provoked challenges to the trading ban. Sir Jeremy Beecham, chair of the Local Government Association, said that local authorities must be free to compete on a properly regulated basis for all services including work outside their own boundaries. He argued that the process of competing for outside work in itself constitutes a form of market testing and would show just how competitive local authority service provision could be. The private sector are free to do this and he said that it is unjust to deny local authority service providers the same opportunity.
A local government white paper is due to be published at the end of July and this will present the opportunity for introducing the power to trade for profit. The pleading so far has been one sided in favour of councils and it remains to be seen how the debate will develop.