Summary: Mrs C complains the Council misled her and her husband into thinking their business would receive funding from the Small Business Grant Fund designed to support businesses impacted by COVID-19. We uphold the complaint finding the couple received poor customer service and advice when applying for such support. This caused raised expectations and put them to unnecessary time and trouble. The Council accepts these findings and at the end of this statement we explain what action it has agreed to remedy this injustice.

The complaint

1. I have called the complainant ‘Mrs C’. Along with her husband (‘Mr C’), she runs a small business in the Council’s area. Mrs C complains the Council did not award the business a Small Business Grant under a scheme designed to support businesses impacted by COVID-19. Mrs C says this followed the Council leading them to think the business would qualify for an award. While the Council did subsequently pay the business a discretionary grant this was around £5,000 less than the £10,000 they expected to receive. Mrs C says the couple also found the application process for a discretionary grant confusing and frustrating.
2. Mrs C says as a result the couple suffered four months of stress and anxiety waiting to hear what support their business would receive. While welcoming the discretionary grant, Mrs C says this is not enough to make up for the losses of the business resulting from COVID-19. They had planned to receive £10,000 when forward planning for their business during the pandemic.

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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 C’s written complaint to the Ombudsman and any supporting information she provided including that gathered in a telephone conversation with her;
• correspondence exchanged between Mr and Mrs C and the Council pre-dating the complaint to the Ombudsman;
• information provided by the Council in reply to our written enquiries;
• recordings of telephone conversations between Mr C and the Council provided to Mrs C by the Council in response to requests for copies;
• relevant Council policies and procedures and government guidance as referred to in the text below.

8. I also sent both Mrs C and the Council a draft decision statement setting out my proposed findings and invited comments. I took account of any comments made in response to the draft before completing this statement.

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What I found

Small Business Grant Fund

9. In March 2020, in response to the COVID-19 pandemic, the government created schemes for councils to pay grants to small businesses. These included the Small Business Grant Fund (SBGF).
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. Government guidance on eligibility for the SBGF scheme said:

• “Any changes to the rating list (rateable value or to the hereditament) after 11 March 2020 including changes which have been backdated to this date should be ignored for the purposes of eligibility.
• Local authorities are not required to adjust, pay or recover grants where the rating list is subsequently amended retrospectively to 11 March 2020.
• In cases where it was factually clear to the Local Authority on 11 March 2020 that the rating list was inaccurate on that date, Local Authorities may withhold the grant and/or award the grant based on their view of who would have been entitled to the grant had the list been accurate.
• This is entirely at the discretion of the Local Authority and only intended to prevent manifest errors”. (see Grant Funding Schemes – Small Business Grant Fund and Retail, Hospitality & Leisure Grant Fund Guidance – paragraphs 35 to 38).

COVID-19 discretionary grants

12. 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”.
13. 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.
14. 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.
15. 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.
16. 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.
17. 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.

The Council discretionary grant scheme

18. The Council joined with three neighbouring authorities to produce its COVID Business Support Grants – Discretionary Fund scheme. The published policy said the fund intended to support those national priority businesses referred to in paragraph 15 above. It said the four authorities wanted to support as many businesses as possible. For that reason, businesses with fewer than 10 employees would have awards ‘capped’ at £5,000.
19. The policy set out the supporting evidence the authorities wanted from businesses when applying for the scheme, including proof of rent or mortgage costs. The policy said each authority would assess applications within their own areas and ‘score’ applications. It did not publish the scoring criteria as part of the policy but has provided a copy to this office. The policy weighted applications according to the deprivation of the area, whether a business traded from a High Street location and its ability to trade during the period of national lockdown measures between April and July 2020.
20. The Council considered applications to the discretionary grant scheme in two tranches. The first period for applications ran between 28 May and 8 June 2020. The second period for applications ran from 29 June to 19 July 2020.
21. The policy said there was no right of appeal against a decision to refuse a discretionary grant.
22. The Council said that it paid all eligible micro-businesses with fewer than 10 employees £2,500 whether they applied in the first or second tranche of applicants. At the end of the second tranche, it had funds remaining in the discretionary grant budget. So, the Council made each micro-business a further award of £2,400.

Chronology of key facts

23. Mr and Mrs C’s business began renting premises from September 2017. The business rented a self-contained space in a much larger building. The main building appeared on the rating list and the owner was liable for business rates. There was no separate listing for the portion of the building occupied by Mr and Mrs C’s business. So, they did not receive any bill for business rates. Mr C later explained to the Council he did not query this at the time as he understood that as a small business it would not have to pay business rates in any event, believing it was entitled to small business rate relief (SBRR).
24. On 18 March 2020, around a week after the Government first announced its intention to set up grant schemes to support businesses impacted by COVID-19, Mr C contacted the Council. He enquired what support his business might receive. The Council noted the business was not liable for business rates. It asked Mr C to provide details to enable it to register his business as liable to pay rates. On 23 March 2020, in response to a further contact from Mr C, the Council sent him a link to its business rates service so he could provide such information. The same day Mr C sent the Council an email explaining what premises the business rented and from what date. He provided supporting information including a copy of the business rental agreement and rent statement.
25. On 30 March 2020 Mr C contacted the Council by telephone which confirmed it had received his application to register the business for business rates. It advised him to also make an application for support from the SBGF. Mr C proceeded to make such an application. On 7 April Mr C sent an email chasing progress on the SBGF application and providing supporting information including a more recent rental agreement.
26. On 9 April 2020, an internal email shows officers discussed whether Mr and Mrs C’s business could receive funds from the SBGF. Officers were doubtful whether the Valuation Office Agency (VOA) which decides which properties should be rated separately would create a separate listing for their business. But said that if it was separately registered it “would appear a valid claim”. Advice in a further internal email dated 9 April for customer service staff followed intended for when they received contacts from businesses occupying premises not currently listed for business rates. The advice told staff they should advise business owners they would be eligible for grant funding “if the merger/split is backdated to before 11 March 2020” and providing they could also “prove they have been open and trading from a date prior to this”.
27. On 21 April 2020, the Council sent a letter to Mr and Mrs C’s business saying it was not eligible for funding from the SBGF. It said this was because it occupied premises with a rateable value of more than £51,000. Mr C replied to this letter the same day. He explained again the background to the business renting premises as part of a much larger building.
28. On 1 May 2020, the Council sent a second letter to the business again saying it was not eligible for funding from the SBGF. This time it said it was because the premises occupied by the business were not listed separately for business rates. The Council explained the VOA might decide to list the premises separately, but it thought that unlikely. Mr C replied the same day saying he still wanted to pursue an application. He would now contact the VOA.
29. On 26 May 2020 the VOA agreed the property occupied by the business should receive a separate listing for business rates. This would be backdated to September 2017. Mr C contacted the Council on 28 May and spoke to an officer enquiring what should be the next steps. He was advised the Council would produce backdated bills for business rates but that Mr C could apply for SBRR so the business would have nothing to pay. He could also apply again for funding from the SBGF. He was told by the officer “you do seem to qualify”. Mr C also asked about applying for funding from the discretionary grant scheme which was now open. The officer advised against this saying “you are better off going for the old one” (i.e. the SBGF scheme).
30. In a further call with the same officer on 4 June the Council told Mr C he could expect to hear about the SBGF application within a couple of weeks. And that it “would hopefully be with the news you were looking for” and “should all go through”.
31. On 11 June 2020, the Council sent a third letter rejecting the business application for funding from the SBGF. This time the Council gave its reason as follows: “I am not able to accept your application at this time because as at the 11th March 2020 the property had not been split and therefore you were not the recorded ratepayer for this property as at the date of entitlement.”
32. Mr C contacted the Council again wanting to appeal this decision. He complained he had been led to believe from his conversations with the Council that an application to the SBGF would be successful. He had also now missed the opportunity to apply to the discretionary grant fund.
33. On 30 June 2020, the Council replied to Mr C under stage one of its corporate complaint procedure. The Council said to make a payment from the SBGF it needed to know the business was eligible to pay rates and receive SBRR on 11 March. But Mr C had not contacted it until 18 March. It invited Mr C to apply in the second tranche of applicants for funding from the discretionary grant fund.
34. The letter also invited Mr C to escalate the complaint if unhappy with the response and he did so. The Council provided a further reply to him under Stage Two of its complaint procedure on 14 July 2020. This upheld the Council’s decision to refuse the business funding under the SBGF. It said that “while the business rate listing may have been incorrect on 11 March 2020 there was no information available to the Council to indicate this was the case until after this date. [Government] guidance is clear that the grant may be awarded where it was factually clear to the Local Authority on 11 March 2020 the rating list was inaccurate on that date. […] As neither you nor the landlord had indicated prior to 11 March that the record was incorrect there was no way for this to be clear to the Council on that date”. The Council also apologised if Mr C ‘felt’ he had been misled by any telephone conversations with its officers.
35. On 18 July 2020 the business applied for a discretionary grant. Mr C enclosed a copy of the business certified accounts detailing rent and other fixed costs as well as evidence of the impact of COVID-19 on the business turnover and profit.
36. On 6 August 2020 the Council refused the business a discretionary grant saying that it did not have fixed costs. The letter said there was no right of appeal to this decision.
37. On 7 August 2020 Mr C contacted the Council saying its decision was wrong and pointed to the accounts provided showing the business fixed costs. On 10 August the Council contacted Mr C and apologised for having overlooked the accounts. It agreed these showed the business had fixed property costs. It told Mr C the business would now qualify for a discretionary grant of £2,500.
38. The Council sent a letter on 21 August confirming the £2,500 award. On 1 September, the Council wrote to the business confirming it would also receive an additional award of £2,400 from the remaining funds in the discretionary grant budget.

My findings

39. I have considered first if the Council was at fault for refusing the business funding from the SBGF. I find it was not. This is for the reasons the Council explained to Mr C in its answer to his complaint at stage two of its complaint procedure on 14 July 2020. I find no reason to challenge its interpretation of the relevant government guidance which I have quoted in paragraph 11 above. I am satisfied the Council had no reason to know on 11 March 2020 that its rating list was factually incorrect, in respect of the property where the business rents space. Further that it was under no obligation to pay funds from the SBGF following the retrospective amendment to the rating list.
40. I note that when the Council provided this reasoning to Mr C it was the fifth time it had written to say the business did not qualify for a grant from the SBGF. However, each of the four preceding letters had provided a different explanation for why not. I find in the first three instances the Council gave inaccurate reasons for refusing the grant funding while the stage one reply to Mr C’s complaint should have explained more clearly the Council’s reasons.
41. This was poor customer service. The Government published its guidance on eligibility to the SBGF on 24 March 2020. Given the extent to which Mr C was in contact with the Council after that date, I do not think it should have taken the Council nearly four months to provide a properly reasoned explanation for why the business did not qualify.
42. It is also clear that in this time Mr C did not receive satisfactory advice in speaking to officers by telephone. In particular I note the content of the calls Mr C had with the Council on 28 May and 4 June 2020. Both of those gave the impression the business would qualify for funding from the SBGF which would have resulted in a payment of £10,000. I am concerned the Council could not give better advice, given these calls took place over two months after the government guidance referenced above.
43. I consider underpinning this poor customer service was the wrong advice given by the Council to its officers in the email of 9 April 2020 where it misinterpreted the government guidance. I recognise the Council will have been under considerable pressure at the time administering new grant schemes while adapting to new ways of working. But it is still disappointing the Council did not pick up on its error sooner and provide more up to date advice to its officers.
44. I also note this poor customer service followed the Council failing to clarify at an early date that an application to the VOA was required before it could create a separate business rates account for the business premises. I am unclear why in his contacts before 1 May 2020 this was not explained to Mr C.
45. I am satisfied this combination of errors and missed opportunities should result in a finding of fault against the Council. The injustice this has caused is that Mr and Mrs C suffered the distress of having their expectations raised in error that their business would receive funding from the SBGF when it was not eligible. Further they were put to unnecessary time and trouble before this position became clear to them.
46. I also find there was a resulting delay in the business applying to the Council’s discretionary fund, meaning that it may have received the first £2,500 from that fund a month earlier. However, I do not find the first award made from the discretionary scheme would have been any higher had the business applied sooner for funding. Nor would an earlier decision have affected the overall level of funding received by the business. So, I find no separable injustice caused by this delay.
47. Looking more widely at the Council’s administration of the discretionary fund I am satisfied that it could reasonably choose to ‘cap’ awards at £5,000 for micro-businesses. It has provided a reasonable explanation for this to achieve consistency with neighbouring authorities and to help as many micro-businesses as possible.
48. But I consider it was fault for the Council to say there could be ‘no appeal’ to its decisions on discretionary grant funding. The facts of this application, where the Council clearly made an error in its first consideration of the application, show the importance of local authorities offering some right of review to a decision. The fact that it reviewed its decision quickly in this case when Mr C pointed out its error is to its credit. But he may not have brought this to the Council’s attention had he taken its letter saying there was no right of appeal at face value. While I consider the Council’s prompt action in this case mitigates any injustice caused by this fault, it can still learn lessons here for any future grant schemes it administers.

Agreed action

49. The Council accepts these findings. To remedy the injustice caused to Mr and Mrs C (see paragraph 45) it has agreed that within 20 working days of a decision on this complaint it will:
1. provide a written apology to Mrs C accepting the findings of this investigation;
2. pay Mrs C £250 in recognition of the distress and time and trouble caused to her and her husband resulting from its poor administration of their SBGF application.
50. The Council has also given a commitment that in relation to any existing or future schemes to support businesses impacted by COVID-19 its decisions will carry rights of review or appeal. It will refer to these both in any policy documents and in letters advising applicants of the outcome of their applications.

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Final decision

51. For reasons set out above I uphold this complaint finding fault by the Council causing injustice. The Council accepts this finding and has agreed action to remedy the injustice. Consequently, I can complete my investigation satisfied with its response.

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Investigator's decision on behalf of the Ombudsman