Summary: Mrs B complains the Council refused her business financial support under grant schemes set up to support small businesses impacted by COVID-19 causing her to miss out on a grant. We uphold the complaint, finding the Council did not follow or take account of all relevant guidance in refusing the business a Retail, Hospitality and Leisure Grant. The Council has agreed to review that decision.

The complaint

1. Mrs B complains the Council refused her charitable business financial support under grant schemes set up to support small businesses suffering a reduction of income because of the impact of COVID-19.
2. Mrs B says as a result the business has missed out on a significant source of financial support during a period when it has only traded at around 15% of its previous turnover. Mrs B says not receiving a grant (estimated to be worth just under 10% of the business’ annual income) has:

• increased the stress experienced in planning through the crisis and made it more likely the business will make redundancies with negative consequences for staff morale; it has left staff vacancies unfilled;
• contributed to a decision not to undertake any planned maintenance works needed to the building; also it has contributed to the business not making investment in equipment necessary to run online events which may have provided an alternative source of income;
• required the business to use reserves that it has invested – a position it cannot sustain long-term and to cut back on other charitable activity.

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The Ombudsman’s role and powers

3. We investigate complaints of injustice caused by ‘maladministration’ and ‘service failure’. I have used the word ‘fault’ to refer to these. We cannot question whether a council’s decision is right or wrong simply because the complainant disagrees with it. We must consider whether there was fault in the way the decision was reached. (Local Government Act 1974, section 34(3), as amended)
4. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
5. This complaint involves events that occurred during the COVID-19 pandemic. The Government introduced a range of new and frequently updated rules and guidance during this time. We can consider whether the Council followed the relevant legislation, guidance and our published “Good Administrative Practice during the response to Covid-19”.
6. If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

7. Before issuing this decision statement I considered:

• Mrs B’s written complaint to the Ombudsman and any supporting information she provided, including that gathered in a telephone conversation with her;
• information provided by the Council in response to enquiries and that available via its website;
• relevant government guidance referred to in the text below.

8. I also gave Mrs B and the Council opportunity to comment on a draft decision statement. Both said they accepted our proposed findings.

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What I found

Retail, Hospitality and Leisure Grants

9. In March 2020, in response to the COVID-19 pandemic, the government created schemes for councils to pay grants to small businesses. These were the Small Business Grant Fund (SBGF) and grants specifically targeted at retail, hospitality and leisure businesses (RHL grants).
10. To receive funding from the SBGF a business had to be in receipt of small business rate relief or rural rates relief. Eligible businesses would receive a grant of £10,000.
11. To be eligible to receive a RHL grant the business had to be first eligible for the Expanded Retail Discount (ERD) scheme for business rates “had that scheme been in force” on 11 March 2020. Eligible businesses would receive a grant of £10,000 or £25,000 dependent on the ratable value of the business.
12. The government said properties that would benefit from the ERD scheme would be those wholly or mainly used:
1. as shops, restaurants, cafes, drinking establishments, cinemas and live music venues;
2. for assembly and leisure;
3. as hotels, guest and boarding premises and self-catering accommodation. (paragraph 10 – Ministry of Housing, Communities & Local Government - Business Rates: Expanded Retail Discount 2020/21: Coronavirus Response – Local Authority Guidance May 2020).
13. Government guidance contained lists of business premises it considered fell into each of the categories above. Of relevance to this complaint are paragraphs which describe “assembly and leisure” uses and “hotels, guest and boarding premises”. Neither list mentions conference centres or religious retreats. (reference as above – paragraphs 12 and 13)
14. The guidance also said “the list above is not intended to be exhaustive as it would be impossible to list the many and varied uses that exist within the qualifying purposes. However, it is intended to be a guide for authorities as to the types of use the Government considers for this purpose to be eligible for relief. Authorities should determine for themselves whether particular properties not listed are broadly similar in nature to those above and if so, to consider them eligible for the relief.” (reference as above – paragraph 15)
15. The guidance also listed businesses the Government did not consider eligible for the relief. This too does not mention conference centres or religious retreats. It does refer to premises “that are not reasonably accessible to visiting members of the public” (reference as above – paragraph 16)
16. The government also published additional guidance in the form of ‘frequently asked questions’ and answers. This said: “it is up to local authorities to apply the guidance as they see fit”. In a section headed ‘charities’ the Q&A contained the following: “Charities getting Charitable Rate Relief get the Expanded Retail Discount so why not the grant? - Charities receiving Charitable Rate Relief can’t be eligible for Small Business Rate Relief or Rural Rate Relief and therefore cannot be eligible under the Small Business Grants Fund. They may be eligible under the Retail, Leisure and Hospitality Grants Fund if they meet the eligibility criteria (e.g. charity shops)”.
17. In April 2020, the Local Government Association published advice in addition to that quoted above from Government on which businesses should benefit from the RHL scheme. The advice said: “Working with Tourism Alliance, we have identified some tourism businesses that are not explicitly mentioned in the guidance, but in our view do fall into the intended category. This is an illustrative list to help teams unfamiliar with the tourism sector. The only official guidance on the rates relief is that published by MHCLG, with a key consideration being that the premises are open to visiting members of the public and are wholly or mainly being used for the purposes outlined in paragraphs 10 to 14 of the guidance. Therefore offices are unlikely to be eligible. We would ask that councils give consideration the premises listed below, as additional examples for inclusion in their local schemes:

• Amusement Arcades
• Vehicle Rental Sites
• Conference and Exhibition venues
• Non-local authority Tourism Information Centres
• Marinas/Boat Hire/Passenger Boat Facilities”.

18. The advice contained a footnote that said: “this list was amended on 20 April following discussions with the MHCLG”. I note an earlier version of the list included reference to additional categories of business later removed from the list; for example, coach operators and language schools.
19. The government announced the closure of the RHL grant scheme on 28 August 2020.

COVID-19 discretionary grants

20. In May 2020, the Government introduced a further discretionary grant scheme aimed at businesses ineligible for the earlier schemes. To support the introduction of this scheme the Government published guidance contained in: “Local Authorities Discretionary Grants Fund- guidance for local authorities”.
21. Under the scheme, councils could award a discretionary grant of £25,000, £10,000 or any sum under £10,000 to businesses which could not access other grant funding (other than the Job Retention Scheme). The Council had discretion over the amount of payment in each case. Government guidance said councils should make payments as quickly as possible to support struggling businesses. It anticipated the first payments under the scheme being received by businesses in early June.
22. The guidance said the discretionary grants were aimed at:
• small and micro businesses;
• businesses with relatively high fixed property costs;
• ones that had suffered a significant fall in income due to COVID-19; and
• ones that occupied a property with a rateable value of under £51,000.
23. The Government said as a guide, the following types of business should be a priority for funding:
• small businesses in shared offices or other flexible workspaces that did not have their own rating assessment;
• regular market traders with fixed building costs, such as rent, who do not have their own business rates assessment;
• bed and breakfasts which pay council tax instead of business rates; and
• charity properties in receipt of charitable business rates relief which would otherwise have been eligible for Small Business Rates Relief or Rural Rate Relief.
24. In taking decisions on the appropriate level of grant, the guidance said councils may want to take account of:
• the level of fixed costs faced by the business;
• the number of employees;
• whether businesses had to close completely and could not trade online; and
• the consequent scale of impact of COVID-19 losses.
25. The guidance said councils should publish details of their discretionary grant scheme on their website. It said this should include clear guidance on which types of business they would prioritise and how they would decide on the level of grant.

Key Facts

26. Mrs B manages a charitable business described as a conference centre and religious retreat. It provides facilities for conferences including meeting rooms, overnight accommodation, board and catering. It also provides spaces for religious worship and opportunities for individuals to use the premises for ‘quiet days’. It has some limited self-catering accommodation which can be booked separately or by guests attending conferences (who otherwise can choose to receive full board).
27. The business premises have a rateable value of less than £51,000. The business receives relief on the rates as it is a charity. The Council then applies further discretionary relief meaning it has no business rates to pay.
28. In April 2020 Mrs B applied on behalf of the business for a RHL grant. The Council refused. It gave its reasons as follows: “Unfortunately, as you are not in receipt of either the Small Business Rates relief or the Retail Discount, you do not qualify for the grant”.
29. Mrs B appealed this decision. The Council again refused the request. It gave its reasons as follows: “For a Charity to have an underlying qualification to the Expanded Retail Discount scheme it must be a hereditament as described in either a, b, or c as listed in the Expanded Retail Discount scheme”. (see paragraph 12 above). It said: “charities won’t fall into b) or c) so need to meet the usage criteria in a) i.e. a retail shop”.
30. The Council also said: “For a charity to have an underlying entitlement to the Expanded Retail Discount they must wholly or mainly be used for the sale of goods to visiting members of the public and be the type of shop as listed in the Government guidance [..] i.e. charity shop”.
31. In reply to our enquiries the Council pointed to advice in the Government FAQ document that says it can interpret the advice as it sees fit. It confirmed its position as set out in paragraph 30 and said the business “does not fall into the normal understanding of what the Council or the MHCLG intended to be treated as one of the retail, leisure & hospitality types listed in the guidance”.
32. Following the refusal of a RHL grant, in May 2020, Mrs B also applied on behalf of the business for a discretionary grant.
33. The Council published a policy which said it would follow the national guidance but added: “local businesses which transact a high proportion of their business in Woking will be prioritised for support through this scheme”.
34. The Council placed applications to the discretionary scheme into various categories. It first identified businesses using shared property with fixed costs (such as rent) and made awards accordingly.
35. It then identified 26 businesses “for Member [i.e. Councillor] review” which included Mrs B’s business. It said: “these businesses did not meet the specific government criteria for earlier grants but have fixed property costs and have lost income”. The Council explained the limited funds remaining in its discretionary grant budget and recommended Members advise officers which businesses they wanted to support.
36. The Council has provided no record of which Members reviewed these applications or how they undertook that review. It wrote to Mrs B in July 2020 to say: “because of the limited amount of funds made available by the Government, the panel only had enough to award grants to less than half the total number of applicants.” The email did not contain further reasons for its decision.

Findings

37. The Council has offered three reasons why it found Mrs B’s business did not qualify for a RHL grant. The first is that it does not consider a charity could operate a business of the kind described in paragraphs b) or c) of Government guidance on the ERD scheme. In other words, the Council does not consider a charity could run a business that was either for assembly or leisure purposes or as a hotel, guest or boarding premises.
38. I find the Council has offered no explanation for this statement. Government guidance makes clear that if a charity meets all other eligibility requirements it can qualify for a RHL grant. It gives an example of a charity shop. But this is only an example. It is self-evidently wrong to say that charities cannot operate premises for other purposes which might appear in paragraph b) or c) of the relevant guidance. For example, there are many national charities that operate hotels as part of their charitable purposes.
39. It was fault therefore for the Council to rely on this reason for rejecting Mrs B’s application for a RHL grant.
40. Second, the Council has said that Mrs B’s business is not one the government intended it should help as it does not fall within one of the ‘types listed in the guidance’. I find there is no mention of either conference centres or religious retreats in the government guidance listing businesses intended to benefit from the RHL scheme. But the guidance also makes clear the lists were not exhaustive. The Council had to also consider if a business was one “broadly similar in nature” to one used for assembly and leisure or guest accommodation.
41. Further, as part of that consideration the Council should have considered associated guidance relevant to deciding whether this might be a business ‘broadly similar’ to those the Government intended to benefit from the RHL scheme.

• First, the Local Government Association guidance published in April 2020. This does not have the same weight as government guidance. However, the list published by the LGA on its website appeared with the support of government as demonstrated by the amendment after its initial publication which removed certain types of business from that list. Conference centres remained on the list throughout. This is the core service that Mrs B’s business offers. The Council should have considered this guidance as part of its consideration of Mrs B’s application.
• Second, paragraph 16 of the ERD scheme guidance. This says that businesses which did not offer services reasonably accessible to members of the public were not intended to benefit from it. The Council should have asked if the business offers services reasonably accessible to members of the public in the way that other businesses listed in the government guidance as qualifying for a RHL grant did.

42. I have seen no evidence the Council applied itself to the guidance referenced in paragraphs 40 and 41 in its decision to refuse Mrs B’s business a RHL grant. That was a fault.
43. Third, the Council has implied that it can interpret government guidance as it sees fit, meaning it is entitled to hold the view that Mrs B’s business does not qualify for a grant. I agree the government intended local authorities to have discretion in individual cases given that its guidance could not cover all possible business types or circumstance. But this does not give the Council unlimited discretion. It must still exercise its discretion taking account of relevant guidance. For the reasons I have explained I do not find it has done so here. Which means it is fault for it to rely on any general discretion as justifying its refusal of a RHL grant to Mrs B’s business.
44. I have gone on to consider the injustice caused by the failure of the Council to make an administratively sound decision. The immediate consequence is that of uncertainty, as I cannot find that a decision taking all relevant factors into account would have reached the same conclusion. That is a form of distress. I set out below recommendations for how the Council can remedy this injustice.
45. I have gone on to consider the Council’s decision to refuse Mrs B’s business a discretionary grant. I find that I do not have enough information to say whether this was an administratively sound decision. This is because I do not know how the Council chose between those businesses where officers asked Councillors to take the final decision.
46. I consider it was fault for the Council not to provide reasons to Mrs B to help her understand why it refused her a discretionary grant. This causes injustice, again in the form of uncertainty, as Mrs B cannot be satisfied the Council made an administratively sound decision in respect of this matter also.
47. This finding does not mean the underlying decision was necessarily flawed. I considered carefully whether to ask the Council to provide more explanation for what Councillors decided. But in view of my findings above I did not see any merit in this. Because the action I recommended to remedy the injustice arising from the first part of the complaint, which the Council has agreed to, may result in there being no further benefit to carrying out further enquiries. However, I considered the Council could still provide further explanation to Mrs B and this is something further it has agreed.

Agreed action

48. The Council accepts these findings. In order to remedy the injustice identified at paragraph 44 above it has agreed that within 20 working days of this decision it will:

• provide a written apology to Mrs B accepting the findings of this investigation; it will also provide her with a written explanation for why it decided not to make a discretionary grant award to her business with reference to the discussion that Councillors had; i.e. it should explain why they decided not to prioritise Mrs B’s business;
• appoint a senior officer not involved in the initial decision to refuse Mrs B’s business a RHL grant to review that decision. That review must take account of our findings. If the review finds Mrs B’s business was eligible to receive a RHL grant the Council will make a payment accordingly, notwithstanding the closure of that scheme.

49. In the event the Council pays Mrs B’s business an amount equivalent to a RHL grant then I will consider the complaint satisfactorily remedied. This is because had Mrs B received such a grant initially her business would have had no recourse to the discretionary grant scheme. However, in the event the review at paragraph 48b) arrives at any different outcome then Mrs B will have the right to make a further complaint to the Ombudsman without going through the Council’s complaint procedure. Such a complaint could consider both the administrative process followed in the review and the Council’s administration of the discretionary grant application Mrs B made in May 2020; if Mrs B is dissatisfied with the further explanation she receives.

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Final decision

50. For reasons set out above I uphold this complaint finding fault by the Council causing injustice to Mrs B. The Council accepts this finding and has agreed action to remedy that injustice. Consequently, I can complete my investigation.

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Investigator's decision on behalf of the Ombudsman