Summary: Mr X complains the Council refused his business a discretionary grant yet gave grants to others. Mr X says he has suffered cash flow issues, increased costs, time and trouble. We find no fault in the Council’s decision to refuse Mr X a grant. At this stage we will not investigate a premature complaint where we are unlikely to find fault causing injustice.

The complaint

1. Mr X complains about the Council’s decision to refuse his business a discretionary grant. Further, that it gave grants to similar businesses and to others that did not meet the criteria. Mr X says he has suffered cash flow issues and increased costs without the grant. He has also been put to time and trouble.

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What I have investigated

2. I will investigate Mr X’s complaint that the Council refused him a discretionary grant. At the end of this decision I have set out why I will not investigate his other complaint.

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The Ombudsman’s role and powers

3. 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)
4. 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)
5. 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))
6. We provide a free service, but must use public money carefully. We may decide not to start or continue with an investigation if we believe the fault has not caused injustice to the person who complained. (Local Government Act 1974, section 24A(6), as amended)
7. 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”.
8. 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

9. I spoke to Mr X and I reviewed documents provided by Mr X and the Council.
10. Mr X and the Council had the opportunity to comment on a draft of this decision. I considered any comments before making a final decision.

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What I found

Government guidance; Discretionary grants

11. In response to the COVID-19 pandemic the Government introduced support for businesses, including a discretionary grant fund. In May 2020 it published “Local Authorities Discretionary Grants Fund- guidance for local authorities”.
12. 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.
13. The funding was aimed at:
• small and micro businesses.
• businesses with relatively high fixed property costs.
• businesses that suffered a significant fall in income due to COVID-19.
• businesses which occupied a property, or part of a property, with a rateable value or mortgage payments of under £51,000.
14. The Government wanted councils to exercise their local knowledge and discretion and recognised economic need would vary across the country. It therefore set some national criteria for the funds but allowed councils to decide which cases to support within those criteria.
15. It considered the following types of business should be a priority for funding but this was a guide only. Councils were to decide themselves if a business was similar and, if so, whether it should be eligible for grants. These businesses were:
• small businesses in shared offices or other flexible workspaces, who did not have their own business rates assessment.
• regular market traders with fixed building costs, such as rent, who did not have their own business rates assessment.
• Bed and Breakfasts which pay Council Tax instead of business rates.
• charity properties in receipt of charitable rates relief.
16. Where limits to funding required councils to prioritise which types of businesses received funding, it would be at their discretion as to which types of business were most relevant to their local economy. There was no penalty for councils using their discretion to prioritise some business types.
17. 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.
18. Councils had to set out their discretionary grant scheme on their website, providing clear guidance on which types of business were prioritised, and how they would decide on the level of grant.

Council policy

19. The Council has provided a copy of a briefing note, dated 20 May 2020, regarding its proposed discretionary grant scheme. This suggested its policy would mirror the Government guidance. It recognised it had discretion which businesses to exclude, however based on the guidance it should exclude the following businesses:
• businesses based at home;
• mobile businesses;
• businesses based mainly on online trade/sales, as these are less likely to have high fixed costs relating to property (e.g. rent, utilities etc);
• “businesses that already have a business rates account with the exception of charities in receipt of mandatory relief and would normally be eligible for Small Business Rates Relief, or businesses which are greatly affected by COVID-19 and are vital to its local economy”.
20. At round one, the Council’s discretionary grant scheme mirrored the Government guidance.
21. It aimed to support:
• small and micro businesses;
• businesses with relatively high ongoing fixed property-related costs;
• businesses which can demonstrate that they have suffered a significant fall in income due to the COVID-19 crisis;
• businesses which occupy property, or part of a property, with a rateable value or annual rent or annual mortgage payments below £51,000.
22. It would prioritise the same four priority areas identified by the Government.
23. It would consider applications from any business meeting the criteria except if:
• they/their business is based at home;
• they operate a mobile businesses;
• their business is based mainly on online trade/sales;
• they are a private landlord renting out a property, including properties let out as a House in Multiple Occupation (HMO).
24. Funding was capped at a maximum of £10,000 per eligible business, or any amount under £10,000. The value of the payment to be made to a business was at the discretion of the Council.
25. The Council has provided copies of emails exchanged showing its consideration of running a second round of funding.
26. The emails set out the Council’s reasons for targeting the next round at businesses with a rateable value between £15k and 30K.
27. The Council ran a second round with slightly different criteria.
28. At the second round, eligible businesses had to:
• be small or micro businesses that pay Business Rates;
• occupy properties with a rateable value between £15,001 and £29,999; and
• demonstrate a significant fall in income due to the COVID-19 crisis.
29. However, businesses could not apply if they were:
• based at home;
• a mobile business;
• based mainly on online trade/sales.
30. It would make payments up to £10k.

Principles of good administrative practice

31. In 2018 the Ombudsman published a guidance document setting out the standards we expect from bodies in jurisdiction Guidance on Good Administrative Practice. In May 2020 we issued an addendum in response to the COVID-19 pandemic; “Good Administrative Practice during the response to Covid-19”. This shows we expected similar standards from councils, even during crisis working. This included:
• 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

32. Mr X runs a business providing serviced accommodation. He applied for a discretionary grant under the first round.
33. On 3 June the Council rejected the request. It explained the information he provided did not demonstrate a significant loss of income due to COVID-19. The grant was aimed at Bed & Breakfasts which had to close in line with Government guidance and thus had no income. It asked him for proof he had to shut and had no income. It also needed proof of mortgage payments and bank statements from January to May 2020.
34. Mr X clarified he ran serviced accommodation rather than a B&B. His business remained open but was losing 34% of its income each month due to reduced occupancy. He referred to enclosed evidence of mortgage payments and bank statements.
35. The Council told Mr X the funding was primarily aimed at the four types of business identified by the Government as a priority. It said in line with the Government guidance and its local policy, it would not consider a shortfall in rent at a Home in Multiple Occupancy (HMO) property for this grant. It provided a link to its policy.
36. Mr X then referred to the Government guidance which set out priorities but did not exclude his type of business. He said he could not find the exclusion in either Government guidance or the Council’s policy. He considered his business was similar to a B&B and so eligible. He asked for a copy of the policy relied on and details of any appeals process.
37. The Council explained it rejected all applications from residential landlords. It referred to its website for a copy of the policy. It said there was no appeals process but he could submit customer feedback.
38. In September the Council issued a further response to Mr X’s MP. It said if Mr X had disputed the decision before the scheme closed it may have been possible to reconsider. However, it had fully allocated payments and the scheme was closed.
39. On 22 September Mr X complained the Council had awarded grants to other businesses that did not qualify and he was unhappy with how it administered the scheme.
40. The Council told Mr X it decided grant payments would not be available to private landlords renting out HMOs. It calculated that if every landlord in its area made a claim, they would receive just £1.50 each. Therefore, in line with Government guidance, it only considered Bed and Breakfast accommodation that was on the Council Tax list. It did not uphold the complaint as it administered its scheme properly.
41. Mr X complained further. In brief he said:
• Other councils did give grants to HMOs.
• The Council told him he could not appeal but then told his MP he should have appealed.
• He queried whether it had recovered funds reported by the press to have been paid in error.
• He queried how the Council reached its decision to exclude HMOs.
• He also asked for further details on grants awarded and whether the Council had sought repayment of any.
42. In November the Council told Mr X it would deal with some of his points as an FOI request. If any grants were claimed fraudulently its team would investigate this. Regarding the press article, this was unrelated to the discretionary grant scheme but it had recouped the money. There was no appeals process but he could have asked for a review or made a complaint. An officer decided on the policy using delegated powers.
43. Mr X contacted the Ombudsman following the Council’s final response. He also provided a list of businesses he said the Council had paid the grant to in error. When I spoke to Mr X he said he had not yet formally complained to the Council about this, though he had mentioned it.
44. In response to enquiries the Council provided records of its decision making on its discretionary grant scheme as referred at paragraph 18 above. It explained its interpretation of the Government guidance was that this did not include anybody registered for Council Tax unless they were a Bed and Breakfast registered for Council Tax instead of Business Rates. Its policy did not originally say it excluded HMOs but it was made clear individuals must operate from a commercial premises to qualify unless they operated a Bed and Breakfast. After receiving a number of applications from landlords claiming for Council Tax properties which were rejected, an additional sentence was added into the policy to make to clear it excluded these.
45. The Council confirmed it was separately addressing Mr X’s concerns that it had paid grants to other businesses in error.
46. In response to a specific enquiry as to whether the Council had further records of its decision making in creating the second round of its scheme, the Council said it had no further records. It said the discretionary scheme did not change from the first round to the second round, it simply opened the application process for a second time because there was funding left from the Council’s original allocation. However, it provided emails evidencing consideration of the second round, as referred at paragraphs 24 and 25 of this decision.

Findings

47. Councils were to have regard to Government guidance in creating their discretionary schemes but they had discretion as to which businesses to prioritise for funding. The Council therefore had discretion to prioritise or exclude certain businesses under its discretionary grant policy. However, it had to follow a proper decision making process in doing so.
48. At round one the Council’s policy reflected Government guidance except that it excluded four types of business. The reasons for excluding three of these are set out in its briefing report.
49. As to HMOs, the Council explained to Mr X it could not support all landlords due to limits on its resources. It further explained to the Ombudsman that it interpreted Government guidance to exclude HMOs. However, there are no contemporaneous written records explaining the Council’s reasons for excluding HMOs. This is not good practice. While the Council had wide discretion to decide how best to operate its scheme, our Guidance on Good Administrative Practice makes clear we expect councils to have a rationale for their decisions and contemporaneous records of this.
50. At round two the Council’s criteria were slightly different. To be eligible a business had to pay business rates and had to have a lower rateable value than at round one. The Council has provided emails which evidence its reasons for amending the rateable value. However, it does not have contemporaneous written records to support its decision to limit eligibility to those paying business rates. Again this is not good practice.
51. However, I have taken into account the specific circumstances of this case. Councils had to devise a new scheme quickly while their services faced unprecedented demand due to the COVID-19 pandemic. The Council does have some written records of its decision making on its grant scheme and these show it had regard to the Government guidance. While these records are not all to the standard the Ombudsman would usually expect, in the given context I consider this shortfall does not meet the threshold for a finding of fault. I therefore find no fault in how the Council set up its discretionary grant schemes.
52. The Council refused Mr X’s application at round one as it was not one of the businesses the Government identified as a priority and it was excluded under its local policy. The Council properly applied its policy and so I do not find fault.
53. I appreciate Mr X is unhappy with the Council’s policy and I note it may differ to that offered by other councils. However, that does not mean the Council is at fault.
54. I have not seen evidence the Council publicised a review process but it did suggest Mr X could submit customer feedback for consideration if he disputed its decision. I consider this gave Mr X adequate opportunity to comment or challenge the Council’s decision further if he wished. I find no fault in this regard.
55. I note Mr X did not apply for a grant at round two as he did not pay business rates and so expected he would not qualify. However, I have found no fault in how the Council decided round two of its scheme.

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Final decision

56. I have completed my investigation. This is because I find no fault in how the Council decided on Mr X’s eligibility for a discretionary grant.

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Parts of the complaint that I did not investigate

57. Mr X has given the Council a list of businesses that he believes it awarded grants to in error. Mr X has not yet completed the Council’s complaints process in relation to this matter. And if the Council made any error awarding grants to other businesses this did not cause significant injustice to Mr X.
58. Therefore, at this stage I will not investigate Mr X’s complaints about the Council’s decisions on other businesses. This is because it is reasonable to give the Council the opportunity to investigate and respond through its complaints process first and, because it is unlikely I will find fault causing significant injustice to Mr X. However, if Mr X remains unhappy at the end of the Council’s complaints process he may wish to raise a new complaint to the Ombudsman and we will consider then whether or not to investigate.

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Investigator's decision on behalf of the Ombudsman