Summary: Mr X complained about the Council’s refusal of a discretionary grant. There was some fault in the way the Council considered his application. The Council should apologise and pay him £100 for the frustration caused.

The complaint

1. Mr X complained about the Council’s refusal of a discretionary grant to assist his business, which was significantly affected by the COVID-19 lockdown. He said that due to the lack of support his business may not survive.

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The Ombudsman’s role and powers

2. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. 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)
3. 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. 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”.
5. We may investigate matters coming to our attention during an investigation, if we consider that a member of the public who has not complained may have suffered an injustice as a result. (Local Government Act 1974, section 26D and 34E, as amended)
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. I considered:
• the information provided by Mr X and spoke to him about this complaint;
• the information provided by the Council and spoke to a Council officer about the complaint;
• relevant law and guidance, including Council policies, as set out below; and
• our guidance on remedies.
8. Mr X and the Council had an opportunity to comments on three draft decisions. I considered their comments before making a final decision.

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What I found

Relevant law and guidance

Local Authority Discretionary Grants

9. In response to the COVID-19 pandemic the Government introduced support for businesses, including a discretionary grant fund.
10. In May 2020 it published “Local Authorities Discretionary Grants Fund- guidance for local authorities”. This allowed councils to give a discretionary grant of £25,000, £10,000 or any sum under £10,000 to businesses which cannot access other grant funding (other than the Job Retention Scheme or Self-Employed Income support scheme). The value of the payment was at the council’s discretion. Only businesses that were trading on 11 March 2020 were eligible for this scheme.
11. The guidance said the funding was aimed at:
• small and micro businesses;
• businesses with relatively high ongoing fixed property costs;
• businesses that suffered a significant fall in income due to COVID-19; and
• businesses which occupied a property, or part of a property, with a rateable value or rent or mortgage payments of under £51,000.
12. The Government published FAQ on discretionary grants in May 2020. This said: “Where a rateable value is not available, the guidance suggests considering annual rent or annual mortgage costs as a proxy”. It also said (at point 46):

“Businesses based in a residential dwelling may take fixed property costs to include their house mortgages etc. Could support be given to these businesses?

It is up to Local Authorities to determine what kind of business they wish to support through this scheme. Tax and insurance details should identify the separate costs of a home-based business. Local Authorities should take steps to understand the specific costs of the business”.

13. As a guide, the Government said the following types of business should be priority for funding:
• small businesses in shared offices or other flexible workspaces, that do not have their own business rates assessment;
• regular market traders with fixed building costs, such as rent, who do not have their own business rates assessment;
• bed & Breakfasts which pay Council Tax instead of business rates; and
• certain charity properties.
14. The list was not intended to be exhaustive and the guidance said councils should consider for themselves whether particular situations not listed were broadly similar and, if so, whether they were eligible for grants. It emphasised that councils should exercise local knowledge and discretion and allowed councils to determine which cases to support within the overall criteria. It said councils had discretion to choose which types of business were most relevant to their local economy. There would be no penalty for councils because of their use of discretion to prioritise some business types.
15. Government guidance said, councils may want to consider the following when deciding on the amount of the grant:
• the level of fixed costs faced by the business;
• the number of employees;
• whether businesses have had to close completely and cannot trade online; and
• the consequent scale of impact of COVID-19 losses.
16. Councils should set out the scope of their discretionary grant scheme on their website, providing clear guidance on which types of business are prioritised, and how they will decide on the level of grant. Specifically, the guidance said that councils should bear in mind the factors set out in paragraph 15 above in order to “set out clear criteria for determining the appropriate level of grant to give businesses clarity”.
17. The Government’s FAQs at point 5 said it was permissible for a business to receive more than one discretionary grant, however it was up to councils to decide how to structure their schemes and whether to allow businesses to apply for a grant for more than one property. In relation to market traders operating in more than one council area, the FAQ at point 32 said the guidance did not exclude a business receiving grants from more than one council and it was up to councils “to assess what is reasonable in the circumstances depending on the business’s fixed costs”. There was no other guidance for councils about businesses that operated across more than one council area.

This Council’s discretionary scheme

18. This Council’s scheme noted the Government had identified the following types of business as priorities for the grant:
• businesses in shared offices, workspaces and premises “where they do not have their own business rates assessment or where it is paid by the landlord. (Note: this does not include private dwellings as these properties pay council tax and not business rates)”.

“To be eligible businesses must have a premises lease on the 11th March of at least 12 months and occupy premises where the landlord is the liable party for business rates”.

“Grants will be awarded between £1,000 and £10,000 [and] will be determined by and equal to three months’ rental payments for the three months commencing 11 March 2020. The minimum grant awarded will be £1,000 and businesses with lower fixed property costs of less than £1000 will therefore not be eligible”;

• market traders: “all traders at Burnley Market occupy separate units with their own business rates valuation and as such should have received grants under the other schemes”;
• bed and breakfasts (limited to up to 6 bed spaces, and subject to evidence the property is used “wholly or mainly as guest or boarding premises”); and
• charities “that are in receipt of Charitable Relief that would otherwise be eligible for small business rates relief”.
2. The Council’s local discretionary element stated small and micro businesses occupying premises with a rateable value of between £15,000 and £51,000 were eligible if they operated “in priority sectors or where they have experienced significant disruption.
• Manufacturing and Engineering.
• Digital/Creative.
• Hospitality and Leisure businesses and supply chain (not eligible under RHL).
• Professional Services.
• Non-Statutory Education Services.
• Construction/construction industry supply chain”.
3. In exceptional circumstances where a business had to close completely a grant of £25,000 could be awarded. Where businesses were able to continue trading but provided evidence the business was impacted by COVID-19 “as a result of: supply chain interruption, a significant reduction in demand from customers/clients, a reduction in output due to staff not being able to work, or a significant reduction in output due to the implementation of social distancing measures they may be eligible for a grant of £10,000.”
4. The only exception to the requirement that the premises must be on the business rating list was for small and micro businesses operating canal boat hire or canal cruise businesses, which had to evidence a significant drop in income to qualify for a grant up to £5,000.
5. The scheme stated businesses would only be eligible for one grant irrespective of the number of premises they occupied.

Principles of good administrative practice

23. The Ombudsman publishes a guidance document setting out the standards we expect from bodies in jurisdiction. We issued an addendum in response to the COVID-19 pandemic; “Good Administrative Practice during the response to Covid-19”. The following points are relevant in this case.
• Basic record keeping is vital during crisis working. There should always be a clear audit trail of how and why decisions were made.
• The basis on which decisions are made and resources allocated, even under emergency conditions, should be open and transparent.
• Decision reasons should be clear, evidence based and where necessary explained in the particular context and circumstances of that decision.
• If you use new or revised policies and processes this should not lead to arbitrary decisions and actions. Ensure you have a clear framework for fair and consistent decision making and operational delivery.

What happened

24. Mr X runs a business that is based at home but delivers services in other locations. He applied for a discretionary grant. This was initially refused because the business premises he leased were located in another council area. The Council said its scheme was only for businesses based in Burnley.
25. Mr X appealed the decision. He said:
• his business was based at his home address in the Council’s area. He provided evidence the business was registered at Companies House at his home address; and
• the published criteria did not state the business had to be based in the Council’s area, nor that the business premises must be in its area. The lack of clarity meant it was now too late to apply for a grant in the other council area.
26. The Council considered his appeal but upheld its original decision that Mr X was not eligible for a grant. It said its scheme was for small and micro businesses occupying business premises with a rateable value of £15,000 to £51,000. It said because Mr X’s business was based in a residential property, it was subject to council tax not businesses rates and was therefore not eligible for a grant under its scheme. It said its published information was clear and businesses were advised to read it carefully before applying. It also said it had no flexibility to depart from the government criteria.
27. Mr X complained to us. He said the reasons the Council gave for refusing the grant were not in the published scheme and the Council should not expect him to know the business had to be operating from business premises in its area to be eligible for a grant for this scheme. He had not applied for a grant from the other council’s scheme and by the time the Council refused his application it was too late to do so.
28. In its comments on an earlier draft decision, the Council provided evidence that Mr X applied for a discretionary grant in the other council area shortly after he complained to us. The other council awarded a grant of £5,000, which Mr X received on 1 September 2020. Mr X acknowledged he received this grant because he had property costs in the other council’s area as he leased premises there. He said if this Council awarded him the £10,000 he believed he was entitled to, he would repay the £5,000 to the other council.

This Council’s scheme

29. The Council provided a report considered by its Chief Executive, which set out its rationale and priorities for its discretionary scheme. This shows it had considered the businesses in its area that might benefit from the scheme. It identified the following businesses may be eligible:
• 94 businesses with a rateable value of between £15,000 and £51,000;
• five B&Bs; and
• one boat hire business.
30. After awarding grants for those businesses, it estimated this would leave around £98,000 for businesses in shared offices and workplaces. However, it noted the funding available would not enable it “to support all the business that have fallen through the net and the scheme has been set in such a way as to support the maximum number of businesses with the greatest need but whilst remaining within an affordability envelope”.
31. The report indicates officers considered the discretionary grant could be paid to businesses that did not have their own business rates assessment or where the business rates were paid by their landlord. It said:

“Note: this does not include private dwellings as these properties pay council tax and not business rates”.

32. The report does not explain how it considered whether home-based business should be included or excluded. But the implication was that they would be excluded if they were not on the rating list.
33. In response to my enquiries, the Council said:
• the government had asked it to prioritise businesses with relatively high ongoing fixed property costs with a rateable value or annual rent or mortgage payments below £51,000. It therefore required businesses to be trading and in occupation of business premises on 11 March 2020 to demonstrate they did have these fixed property-related costs;
• it was not able to support every business with the limited funding it had; and
• the government supported home-based businesses through other national schemes. For example, the Self-Employment Income Support Scheme.
34. The Council officer I spoke to said that if the business was based in a residential address but was registered for business rates, it would be eligible for a grant. However, if it was not registered for business rates, it would not be eligible. It would not consider the business’s property costs if it was not registered for business rates.

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My findings

35. The Council initially refused a grant on the basis the business usually operated from premises outside its area. This was fault.
36. Although the Government did not give guidance to councils on how to treat businesses that traded in more than one council area, the FAQ envisage councils would consider this and set out its position in the published scheme. There is nothing in this Council’s published scheme that said the business premises for which there were fixed costs had to be situated in the Council’s area and, although Mr X also used businesses premises elsewhere, his business was based in the Council’s area.
37. On appeal, the Council accepted Mr X’s business was based in its area. Therefore, any injustice Mr X suffered as a result of this fault was remedied by the appeal decision.
38. The Council then refused a grant on the basis that Mr X’s business was based in a residential property which was subject to council tax and not business rates. This meant it was not eligible.
39. Government guidance did allow councils to award a discretionary grant to home-based businesses and suggested how property costs could be considered where the business did not pay business rates. Government therefore expressly envisaged there would be circumstances where home based businesses, paying council tax, could be eligible for the grants. The Council, in designing its scheme, did not set out its reasons for excluding them.
40. Although councils had wide discretion when designing their discretionary schemes, they should not adopt a blanket approach that rules out whole categories of eligibility without compelling evidence to support that exclusion. The Ombudsman expects councils to have a clear rationale for their decisions and records of their reasons where it departs from Government guidance. The onus was therefore on the Council, when designing its scheme, to set out with sufficient clarity why it intended to support only certain types of business.
41. In this case, the report to its Chief Executive did indicate the Council’s view that it could not support all small businesses in its area and set out the types of business would prioritise. Its intention was to prioritise businesses with high ongoing property costs in line with Government guidance. But it did not show it considered whether some home based business may have high property-related costs and the reasons why the scheme should exclude such businesses.
42. That said, we recognise councils were under pressure to devise their schemes and start making payments to local businesses very quickly. If they had had more time, their schemes and decision-making record may have been more detailed.
43. Taking into account all the circumstances, the lack of a record to show how the Council considered its decision to exclude home based businesses was poor practice but it does not amount to maladministration.
44. However, although Mr X’s business was registered at a home address, it did have fixed property costs in the form of a business lease (albeit for premises in another council area). It was the Government’s intention to prioritise businesses with such costs for discretionary grants and the Council’s intention was the scheme would be in line with Government guidance in this respect. Further, the Guidance said councils should consider whether a business was “broadly similar” to those it said should be prioritised. Therefore, I consider the Council should have considered whether the circumstances of Mr X’s business meant it should be eligible for a grant and not simply rejected the application on the grounds the business was registered at a home address. The failure to properly consider the application at the appeal stage was fault.
45. The Council’s scheme has since closed and I cannot recommend it reconsiders the scheme itself. I have considered whether to recommend it reconsiders this application and, if it decides it should have awarded a grant, pays a sum equivalent to the grant it would have awarded. I note that after complaining to us Mr X was able to claim a grant in the other council area where he has a lease on business premises. Although Mr X argues that he would have secured a higher grant if his application had been considered by this Council that outcome is by no means certain. Further, I do not consider it is appropriate for me to ask this Council to reconsider his application because it is not within the spirit of the scheme for two councils to award grants based on the same property costs. That said, I recognise the frustration and time and trouble Mr X was put to in pursuing the matter and have recommended action to remedy that injustice.

Agreed action

46. The Council should, within one month of the date of the final decision, apologise to Mr X and pay him £100 for the uncertainty caused by the faults identified.

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Final decision

47. I have completed my investigation. I have found fault leading to personal injustice and have recommended action to remedy that injustice.

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Investigator's decision on behalf of the Ombudsman