Summary: Ms E complains about the Council’s refusal of a grant to support her business, which suffered a loss of trade because of the impact of COVID-19. We uphold the complaint finding fault in the Council’s consideration of Ms E’s application for a discretionary grant. This caused Ms E distress and we recommend the Council reconsider its decision taking account of our findings.

The complaint

1. I have called the complainant, ‘Ms E’. She complains about the Council’s refusal to provide her with a grant to support her business, which suffered a loss of trade as a result of COVID-19.
2. Ms E says as a result she has suffered increased stress meeting business rent and other costs.

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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:

• Ms E’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 written enquiries.
• Relevant law, national guidance and local policy as referred to in the text below.
• Comments made on a draft decision statement by both Ms E and the Council, where I set out my initial thinking about the complaint.

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What I found

Relevant Law and Guidance

Small Business Grant Fund

8. In March 2020, in response to the COVID-19 pandemic, the government created schemes for councils to pay grants to small businesses. Relevant to this complaint it created the Small Business Grant Fund (SBGF).
9. To be eligible to receive a payment from the SBGF the business had to first be eligible for the Small Business Rate Relief Scheme on 11 March 2020. For eligible businesses with a rateable value of less than £51,000 a year the grant was £10,000.
10. Government guidance said that any changes to the rating list after 11 March 2020 “including changes which have been backdated […] should be ignored for the purposes of eligibility”. And that “local authorities are not required to adjust, pay or recover grants where the rating list is subsequently amended retrospectively to 11 March 2020”.

COVID-19 discretionary grants

11. In May 2020, the Government introduced a further discretionary grant scheme. It also published guidance contained in: “Local Authorities discretionary Grants Fund- guidance for local authorities”. It said discretionary grants were “aimed at small and micro businesses who were not eligible” for the earlier grant schemes, including funding from the SBGF.
12. 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.
13. The guidance said the discretionary grants were aimed at:
• small and micro business;
• business 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.
14. 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; examples could include units in industrial parks, science parks and incubators which 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 and breakfast businesses which pay council tax instead of business rates; and
• certain charity properties.
15. The guidance said the list at paragraph 14 “is not intended to be exhaustive but is intended as a guide for local authorities as to the type of business the government considers should be a priority for the scheme. Authorities should determine for themselves whether particular situations not listed are broadly similar in nature to those above and, if so, whether they should be eligible for grants from the discretionary scheme”.
16. The guidance said councils should publish details of their discretionary grant scheme on their website. 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’s discretionary grant scheme

17. The Council published its scheme online. Of relevance to this complaint I note the following:

• The introduction to the policy said “this additional fund is aimed at small businesses who were not eligible for the Small Business Grant Fund or the Retail, Leisure and Hospitality Fund. The fund is intended to help cover fixed costs faced by businesses, where they can demonstrate that they cannot meet these”.
• Section 2 of the policy began by referring to the suggested national priority businesses described in paragraph 14. The Council’s policy said it would prioritise these businesses.
• It then set out eligibility criteria in line with government advice quoted at paragraph 13. The Council said “in order to be considered eligible for assistance, in addition to being one of the prioritised business types listed above, the business must also meet all of the following criteria: (emphasis as per original)
1. Businesses with ongoing fixed building-related costs; and
2. Businesses which can demonstrate that they have suffered a significant fall in income specifically due to the COVID-19 crisis; and.
3. Business that were actively trading on 11.03.20
• Section 2 continued saying eligible businesses must also be small or micro-businesses and provided a definition of these also contained in government guidance.
• Section 3 of the policy explained which businesses were not eligible to apply for the scheme. These included businesses which had received funding from the SBGF scheme.
• Section 4 of the policy headed ‘funding levels’ said the Council would “make grant awards to those business types outlined above” so long as they fell into one of three tiers of need. All would have to demonstrate a loss of income arising from COVID-19 of more than 50%. What tier they went in would depend on either the business rateable value or annual rent or mortgage costs. The Council would then allocate awards dependent on which tier the business was in.
• Section 9 of the policy explained the Council would offer a review where a business expressed dissatisfaction with its decision.

Key Facts/Chronology

18. Ms E works as a sole trader and on 9 March 2020 began renting a serviced office from a recently completed new building in the Council’s area. The company renting the office space provides secure individual offices for its tenants as well as shared office space. Ms E rented a private office. As a tenant she also had access to shared facilities in the building such as meeting rooms and lounges. She also used reception and cleaning services provided by the company. The company charges a monthly rent and says this is inclusive of rates.
19. On 11 March 2020, the building was not on the rating list. In April 2020, following the announcement of the initial government schemes to support businesses impacted by COVID-19 Ms E enquired about funding from the SBGF. The Council told her she could not receive this because the property had no rating assessment.
20. When the Council announced its discretionary grant scheme in May 2020 Ms E applied for funding from this also. She explained how income to her business fell after the onset of COVID-19 but she had ongoing rental costs. In June 2020 the Council wrote to Ms E and said she could not receive a discretionary grant. It said her application “did not fit the criteria” in its policy. The letter set out those businesses the Council aimed to support in line with government guidance quoted in paragraph 14.
21. When Ms E expressed dissatisfaction with this decision she asked the Council to consider if she worked in a shared office or flexible space. In response, the Council said it did not consider Ms E traded from ‘shared office space’ as she rented an office for her exclusive use. It considered that office should receive a separate rating from the Valuation Office Agency (VOA). It noted that as of July 2020, the VOA had still not added the building to the rating list.
22. In its final response to Ms E’s complaint, sent in August 2020 the Council also said:

• Ms E did not qualify for a grant from the SBGF as the Council did not know of any error in its rating list on that day. It had received no notice of completion and occupation from either the building owner or any tenant.
• That Government advice was to consider a shared office space as one which the VOA would not separately rate. The Council said the key issue in its decision to refuse a discretionary grant was “whether the VOA consider you occupy an office which should be separately rated as an individual unit”. The Council had followed Government guidance to prioritise certain businesses and this did not include “those which should have been separately rated but are not”.

23. Also, in August 2020 the VOA completed an assessment for the property where Ms E rented an office. It brought the whole building into the rating list (except for a café which it gave a separate listing to). So it did not create a separate rating list for the space which Ms E rented.
24. Since bringing the property into the rating list the building owner has appealed to the VOA saying individual offices should be separately rated. That appeal has not yet been decided.
25. Ms E gave notice on her tenancy and vacated in September 2020.

My findings

26. I find no fault in the Council’s position that Ms E is not eligible to receive funding from the SBGF scheme. I am satisfied that on 11 March 2020 the Council did not know the building where Ms E rented space had completed or know of her occupancy of an office within the building. I accept Ms E had no reason to contact the Council then to enquire about her liability for business rates as she understood she would not be liable for non-domestic rates based on information from the building owner. It was only later the Council suggested she may become liable (although may also qualify for small business rate relief). That was uncertain. And even if Ms E’s office had become listed for non-domestic rates retrospectively, there was no onus on the Council to provide SBGF funding. As Government guidance explained the Council could not make SBGF payments for businesses it only learnt retrospectively occupied rateable premises (including where the business only became liable for non-domestic rates retrospectively).
27. I have gone on therefore to consider the Council’s decision not to pay Ms E a discretionary grant.
28. I find the Council’s correspondence to Ms E could have been clearer about why it considered she did not qualify for a grant. It did not make clear whether this was because it considered her business ineligible for such funding or because it was not a priority for funding. Using phrases like your business “does not fit the criteria” or “does not qualify” confused these two concepts.
29. I find this confusion probably arose in turn from how the Council chose to frame its discretionary grant policy. It adopted government guidance. But it chose to explain the mandatory eligibility criteria after setting out which businesses it would prioritise for funding.
30. I am satisfied from the facts listed above Ms E’s application met all the mandatory criteria. She explained her business traded on 11 March, had fixed property costs and provided a statement showing how her income fell because of COVID-19. I am further satisfied that Ms E could apply for the scheme as a micro-business. I am also satisfied Ms E’s business was not ineligible as it had not received any funding from any of the other government schemes such as the SBGF scheme.
31. The Council’s decision was therefore one that Ms E’s business was not a priority for its scheme. In considering whether this was an administratively sound decision I note first the Government has given councils wide discretion in drawing up their schemes. In this case the Council stated that its scheme would prioritise the types of business identified in national guidance. There was no inherent fault in that.
32. Its decision hinged on its interpretation that Ms E’s business was not a priority because it was not a business using a “shared office or other flexible workspace […] which does not have their own business rates assessment”. The Council noted Ms E’s office did not have its own rates assessment at the time it refused the discretionary grant. So, on a literal interpretation of the facts there would appear no reason for the Council to refuse a grant.
33. Instead, its decision relied on the view that in due course the VOA would create a separate listing for the space rented by Ms E’s business. The Council therefore decided Ms E’s business was not one intended to benefit from the scheme as it would have such an assessment in due course.
34. I do not question the Council’s expertise in rating matters which led it to this view. I also accept the Council could, using its discretion, ask itself if a business applying for a discretionary grant was one the government intended to benefit from the scheme. The possibility or likelihood the business may have its own rating assessment in time would be a relevant factor in answering that question.
35. However, I do not consider that could be the only relevant factor in deciding if Ms E’s business was one which the Government intended to benefit from the scheme. While the Government clearly left much to the Council’s discretion, I consider there were two key passages in its national guidance also of relevance.
36. First the guidance advised the Council to consider if a business may be ‘broadly similar’ to one of the four types of priority businesses highlighted. This required the Council to consider more than just the possibility the business space rented by Ms E would have its own rating assessment in time. The Council did not apply itself to this test. It only asked itself if Ms E’s business was the same as that described in government guidance. It is for the Council to decide how close a business must be to be “broadly similar” to one described in the priority categories. But it clearly has to go beyond the test of whether something is the same as that described; because something being ‘similar’ and ‘the same’ are fundamentally different concepts.
37. Second, the national guidance explained discretionary grants were aimed at businesses which could not benefit from the SBGF scheme or other schemes designed to help businesses cope with the impact of COVID-19. The Council also described this as a principle underpinning its scheme in its introduction. However, there was no general presumption that businesses assessed for business rates could not apply.
38. Government guidance is silent on why specifically businesses in shared office type accommodation with their own business rates assessment were not a priority for the scheme. However, one inference may be because many of these businesses should have already qualified for the SBGF scheme, which the discretionary scheme excluded. Ms E could not qualify for funding for the SBGF scheme. Having considered the Council’s correspondence to Ms E I am not clear the Council has considered this factor in its decision. But I considered it went to the heart of whether Ms E’s business was one which the government intended to benefit from the scheme.
39. As a consequence of not applying itself fully to the relevant guidance, I found the Council’s decision to refuse Ms E’s business a discretionary grant was one made with fault.
40. This caused Ms E injustice. I cannot say that but for the fault the Council would have made a discretionary grant payable to Ms E. But it may have done and we regard such uncertainty as a form of distress.

Agreed action

41. The Council accepts these findings. To remedy the injustice identified at paragraph 40 it has agreed that within 20 working days of a decision on this complaint it will:
1. apologise to Ms E accepting the findings of this investigation;
2. carry out a further review of its decision to refuse Ms E a discretionary grant taking account of the analysis above; in the event this results in a favourable decision to Ms E then it should make payment to her in line with Section 4 of its local policy, even though that scheme is now closed.
42. In addition, the Council has agreed that in the event any similar scheme is introduced in the future, it will look to improve the wording of any policy which accompanies it. In particular, I would suggest that it clearly separates the concepts of eligibility and priority.
43. Ms E will have the right to make a further complaint to the Ombudsman in the event she considers there is fault in the review decision agreed at paragraph 41). We will not expect her to go through the Council complaint process again in such circumstances.

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Final decision

44. For reasons set out above I uphold this complaint finding fault by the Council caused injustice to Ms E. The Council has agreed action to remedy Ms E’s injustice. I can therefore now complete my investigation.

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Investigator's decision on behalf of the Ombudsman