Summary: Mr X complains about the Council’s handling of grant schemes and his complaints, resulting in loss of trust and financial difficulties. We find fault by the Council and recommend it provides Mr X an apology, payment for distress and payment for time and trouble.

The complaint

1. Mr X complains:
• The Council did not address his complaints properly, compounding the failings he raised.
• The Council’s discretionary grant scheme is discriminatory.
• The Council has not been fair and transparent its use of a quality supplement for early years’ funding.
2. Mr X says he has lost trust in the Council and his business is financially worse off because of its failings.

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What I have investigated

3. I have investigated the first two parts of Mr X’s complaint. At the end of this decision I have explained why I have not investigated the remaining complaint.

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The Ombudsman’s role and powers

4. 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)
5. 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)
6. The law says we cannot normally investigate a complaint unless we are satisfied the council knows about the complaint and has had an opportunity to investigate and reply. However, we may decide to investigate if we consider it would be unreasonable to notify the council of the complaint and give it an opportunity to investigate and reply (Local Government Act 1974, section 26(5))
7. 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

8. I spoke to Mr X and I reviewed documents provided by Mr X and the Council.
9. I gave Mr X and the Council the opportunity to comment on a draft of this decision. I considered the comments provided before finalising my decision.

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What I found

Free Early Education Entitlement (FEEE)

10. The Free Early Education Entitlement is a central Government scheme funded through councils. The scheme provides up to 15 or 30 hours per week of free childcare for children aged 2, 3 or 4 years old until they reach compulsory school age.

Early years national funding formula (EYNFF)

11. The Government publishes operational guidance for councils on early years funding. This details how councils should use funding supplements - that is funding paid to providers in addition to the base rate to reflect local needs or policy objectives.
12. The allowable supplements include a quality (discretionary supplement); to support workforce qualifications, or system leadership (supporting high quality providers leading other providers in the local area).

Business rates holiday

13. On 18 March 2020, the Government announced a business rates holiday for many nurseries in England for the 2020 to 2021 tax year.

Coronavirus Job Retention Scheme (CJRS)

14. The CJRS helped businesses continue to pay part of their employees’ wages who would otherwise have been laid off during the COVID-19 pandemic.

Grant Funding Schemes

15. The Government introduced two grant schemes to support businesses during the COVID-19 pandemic. The Department for Business, Energy and Industrial Strategy published guidance for councils on how to apply these: “Grant Funding Schemes” (March 2020).
16. Businesses which, on 11 March 2020, received Small Business Rates Relief (“SBRR”) could be eligible for a payment of £10,000 as a Small Business grant. (SBRR is only available to properties with a rateable value less than £15,000).
17. Businesses which, on 11 March 2020, would have received the Expanded Retail Discount could be eligible for a Retail, Hospitality or Leisure grant between £10,000 and £25,000. (The Expanded Retail Discount applied to occupied businesses used for retail, hospitality or leisure).

Discretionary grants

18. In response to the COVID-19 pandemic the Government introduced further support for businesses, by way of a discretionary grant fund. In May 2020 it published “Local Authorities Discretionary Grants Fund- guidance for local authorities”.
19. Councils could give 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 value of the payment was at the council’s discretion.
20. The funding was aimed at:
• small and micro business,
• business with relatively high fixed property costs,
• ones that have suffered a significant fall in income due to COVID-19 and
• ones which occupy a property with a rateable value or annual mortgage payments of under £51,000.
21. The Government considered the following types of business should be a priority for funding:
• small businesses in shared offices or other flexible workspaces who 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
• charities in receipt of charitable relief
22. Councils should decide themselves if a business was similar to those listed above and, if so, whether it should be eligible for grants.
23. In taking decisions on the appropriate level of grant, councils could take into account:
• 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.
24. Councils had to set out their discretionary grant scheme on their website, providing clear guidance on which types of business were prioritised, and how it would decide on the level of grant.

Council’s discretionary grant policy

25. The Council has provided a copy of its published policy which applies to all West of England unitary authorities. I note this refers to and mirrors the Government guidance in terms of the businesses it would support and the priorities for funding.
26. Limited discretion was available to support businesses that met the eligibility criteria but were not in the four priority groups. Councils also had discretion to further prioritise applications received based on local economic need and subject to the availability of funding.
27. To support as many businesses as possible it would cap each award at £5000.
28. The policy also sets out how the Council would decide on the level of grant payable to each business.

What happened

29. On 31 March 2020 Mr X complained about the Council’s lack of support for private, voluntary and independent (PVI) early years’ settings. His setting had lost 70% of its income. Although it continued to receive FEEE funding this was not enough to retain staff. It had furloughed staff where possible but needed to retain over half to provide childcare for keyworkers. He wanted the setting to stay open but did not had adequate funding. He considered the Council had failed to protect PVI providers. He wanted the Council to either agree it should close and no longer support key workers or cover the costs of staying open.
30. On 15 April 2020 Mr X complained the Council had not provided business rates’ relief or confirmed whether the business was eligible for a Small Business grant. He referred to a Government announcement which said:

“We have announced that childcare providers will be eligible for a business rates holiday for one year. That means non-local authority providers of childcare (registered with Ofsted and providing EYFS) will pay no business rates in 2020 to 2021, from 1 April. This includes nurseries which are eligible for a charitable status relief – they will also pay no business rates at all in 2020-21 – and nurseries in receipt of small business rate relief or rural rate relief will benefit from small business grant funding of £10,000”.

31. On 20 April the Council responded to the complaint of 31 March. It told Mr X the Council understood the pressures on PVI settings. It outlined the support available including continued FEEE, temporary business rate relief, the Coronavirus Job Retention Scheme, VAT deferments and a Business Interruption Loan Scheme. It confirmed the risks of the Government’s approach had been raised to senior leaders of the council and regularly communicated to the Department of Education. The Council was sorry to hear of the impact to his business. It expected his decision whether to close would be guided by the business’ finances and the Government incentives available. It confirmed the decision was for him and his trustees to make and it would feedback his concerns to the Department for Education.
32. On 23 April Mr X complained further. He said the Council’s response did not reflect the latest Government guidance issued on 17 April. This said councils could redistribute FEEE where it was needed. He asked the Council for an assurance it would not seek to claw back FEEE from settings that tried to stay open as long as possible. He did not receive SBRR or a Small Business grant and the Council had not addressed his complaint of 15 April about this. The Council has since announced limits to the CJRS. The support in place did not cover their costs. He therefore challenged the Council’s claim it was doing all it could to support the PVI sector. The Council had not done enough to raise issues with the Early Years National Funding Formula or FEEE rate with central Government. Relevant councillors had ignored him. His business needed money to cover losses or assurances it would not be penalised for protecting itself.
33. The Council acknowledged receipt of this correspondence and said it aimed to reply by 18 May.
34. On 25 April the Council wrote to Mr X confirming it would grant the business £25,000 as a Retail, Hospitality and Leisure grant. I note this letter warned:

“Where any grant awarded to the ratepayer by the Council is subsequently determined to be unlawful the ratepayer agrees to repay the full amount of such grant back to the Council upon demand.”

35. On 6 May the Council replied to Mr X’s complaint of 15 April. It explained it tried to identify as many accounts as possible that would not have to pay Business Rates for 2020 in order to stop taking payments from April. However, it missed his account. It apologised, confirmed it would refund £464 taken in error and confirmed it would issue a revised bill applying the full nursery rates relief as soon as it had the relevant software update. In investigating this issue it found it paid the business £25,000 in error. The business was not eligible for the Small Business grant as it had a rateable value over £15,000 and nurseries were not included in the Retail, Hospitality and Leisure grant. It asked for Mr X to return this award.
36. On 27 May Mr X chased the Council for a response to his complaint of 23 April and wanted the further delays added to this. He also complained he had been waiting for several weeks for a Council Early Years officer to reply to urgent requests for consultation and assistance with the Government re-opening guidelines.
37. On 10 July the Council told Mr X he was not eligible for a discretionary grant as the business had no fixed property rental costs.
38. On 17 August Mr X again chased the Council for a response to his complaint. He said his MP had also contacted the Council to no avail.
39. On 18 August the Council explained its delay was due to unprecedented increase of demand on resources, staff and the numbers of requests due to COVID-19. The relevant officer was also off work sick. It could not yet say when it would be able to reply and apologised.
40. On 25 September the Council provided its final response. It explained:
• Central Government put in place all the financial support and it had no further funding to support PVI settings.
• The content of its letter of 20 April was correct at the time of writing on 17 April, before it was sent out. One piece of national guidance related to FEEE did change between 17 and 20 April. This was an unfortunate oversight when guidance was changing rapidly.
• It agreed to continue with the dual funding guarantee as stated in the original Government guidance and did so until the end of July 2020
• Its Early Years officer has been in frequent communication with the setting to provide guidance and support. It considered the level of communication appropriate.
• It did however partially uphold the complaint due to the delay in its stage 2 response.
• Its use of the quality supplement is compliant with regulations on EYNFF. It used the supplement to fund Lead Teachers across the city as points of high quality support to lead other providers in their area. The next consultation with the early year sector on the use of the supplements was due to take place Autumn 2020.
• It was correct to refuse the grant applications. His application for a discretionary grant was rejected as the business had no fixed property costs. It decided this fairly and in line with the correct process with reference to the Government guidance.
41. Mr X then contacted the Ombudsman. When I spoke to Mr X he explained the business relied on the Council’s £25,000 grant when applying for further funding from a third party. Had he known the business would not receive the grant he would have sought greater funding from the third party. As it was the business had to make up the shortfall by other means such as reducing services and increasing fees. He provided a copy of the business’ emergency budget used to support the application for funding from a third party. This showed income, including the Council grant, and a shortfall of a further £25,000. Mr X provided an email dated 7 May from the third party acknowledging receipt of his application. And correspondence issued by the third party in July, granting the business the £25,000 sought.
42. In response to my enquiries the Council said:
• It identified the need for additional resource and had temporarily employed additional staff within the customer relations team to ensure no future delays. The temporary staff are still currently employed, and the Council is currently reviewing its resource for the department.
• The grants scheme introduced at great pace in March 2020, required additional staffing resource from outside the business rate team. An inexperienced new member to the team issued the RHL grant in error as they did not follow the process guidance. This Grant scheme has now closed. Further grant schemes put in place by the Government have allowed for more time to implement procedures and training.
• Its letter of 6 May to Mr X, explaining it awarded £25,000 in error, would have been sent by email.
43. In comments on my draft decision Mr X said, in summary:
• He applied for third party funding ahead of 7 May; the acknowledgement of the application came some days later. The third party would have provided greater funding had he asked for it.
• The Council had a professional responsibility to check for any recent changes to Government guidance before responding to him. This was a major policy change and other organisations reacted on the same day.
• The Council made only cursory enquiries in addressing his complaint. He considers the Council will not make any lasting improvements unless it accepts that technical complaints should be investigated by someone with sufficient relevant technical knowledge.

Findings

44. The Council did not initially award nursery rates relief to Mr X’s business. This is fault. However, it remedied this fault before he complained to the Ombudsman. It apologised, provided an explanation and applied the relief. I am satisfied with the action taken.
45. The Council’s decision that Mr X’s business did not qualify for a Small Business grant was in line with relevant law and policy. The business had a rateable value above £15,000 meaning it was not eligible for SBRR or the Small Business grant.
46. Mr X’s business did not qualify for an RHL grant as it was not one of the eligible business types as set out in the Government guidance. The Council accepts it gave Mr X a RHL grant of £25,000 in error. This amounts to fault. I accept Mr X relied on the grant when seeking further funding for his business. However, I am mindful the Council warned it could recover the grant if awarded in error; that it quickly informed Mr X of its error; that I have not seen evidence Mr X applied for further funding before receiving notice of this error and; that I cannot say with certainty whether Mr X would have been successful in gaining further funding in any event. I therefore find the Council’s fault caused Mr X some uncertainty and distress but I cannot say he lost the opportunity of increased third party funding as a direct result of the Council’s fault. I will recommend the Council make a payment to Mr X in recognition of the distress and uncertainty. I note the Council has since taken action to prevent recurrence of the fault.
47. Central government issued guidance to councils that discretionary grants should support businesses with relatively high fixed property costs. The Council took account of this and its own policy mirrored the Government guidance, requiring evidence of ongoing fixed property costs. The Council then refused Mr X a grant as he had no fixed property costs. I am satisfied the Council’s decision was in line with its policy and the Government guidance. I therefore find no fault. I recognise Mr X is unhappy the grants were not available to businesses without property costs, however the Ombudsman expects councils to follow Government guidance.
48. The Council’s response of 20 April did not reflect the latest Government guidance of 17 April. However, as it sent the response just one working day after the Government issued new guidance, I do not consider this amounts to fault.
49. The Council delayed responding to Mr X’s complaint of 23 April. I note it faced unprecedented demand but the length of delay was significant and amounts to fault. Because the Council did not keep Mr X updated he was put to time and trouble chasing a response. I will recommend the Council make a payment to Mr X in recognition of this. I am satisfied with the action already taken by the Council to prevent recurrence.
50. I note Mr X is unhappy with the quality of the Council’s complaint responses and considers its final response inadequate. However, while I accept the Council’s responses could have been more detailed, I do not consider this amounts to fault.

Agreed action

51. To remedy the fault identified above I recommend the Council carry out the following actions within one month of the date of my decision:
• Provide Mr X with a further written apology for the identified failings;
• Pay Mr X £100 for time and trouble;
• Pay Mr X £300 for distress and uncertainty.
52. The Council has accepted my recommendations.

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Final decision

53. I find the Council at fault in its decision to award Mr X a Retail, Hospitality and Leisure grant and I find fault in its handling of Mr X’s complaints. The Council has accepted my recommendations and I have completed my investigation.

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Parts of the complaint that I did not investigate

54. I did not investigate Mr X’s complaint that the Council has not been fair and transparent its use of a quality supplement for early years’ funding. This is because the Council did not have opportunity to investigate and reply before Mr X contacted the Ombudsman.

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Investigator's decision on behalf of the Ombudsman