Summary: Mr X complained the Council wrongly refused a COVID-19 discretionary business grant because his business was based at home. The Council was not at fault.

The complaint

1. Mr X complained the Council wrongly refused a discretionary grant on the grounds his businesses was home-based. Mr and Mrs X both operate businesses from their home, which were affected by the COVID-19 pandemic. Mrs X has not complained about support for her business.
2. Mr X says they bought a larger home specifically to support their businesses and, due to the COVID-19 pandemic and lack of support from the Council, have now had to sell it.
3. Mr X was unhappy with the process, which was confusing. He was also unhappy the Council did not contact him about his application but did speak to a third party without his authority, possibly disclosing personal information.

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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. 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)
5. 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. 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”.
7. The Information Commissioner's Office considers complaints about freedom of information. Its decision notices may be appealed to the First Tier Tribunal (Information Rights). So, where we receive complaints about freedom of information, we normally consider it reasonable to expect the person to refer the matter to the Information Commissioner.

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How I considered this complaint

8. I spoke to Mr X and considered the information provided by him and the Council.
9. Mr X and the Council commented on two draft decisions and I considered their comments before making a final decision.

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What I found

Relevant law and guidance

Discretionary grants

10. In response to the COVID-19 pandemic the Government introduced support for businesses, including a discretionary grant fund.
11. 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 is at the council’s discretion. Businesses claiming the grant must meet the following eligibility criteria:
• occupy a property, or part of a property, with a rateable value or mortgage payments of under £51,000;
• have relatively high fixed property costs;
• have suffered a significant fall in income due to COVID-19; and
• be trading on 11 March 2020.
13. The funding was aimed at:
• small and micro businesses;
• businesses with relatively high fixed property costs;
• businesses that have suffered a significant fall in income due to COVID-19; and
• businesses which occupy a property, or part of a property, with a rateable value or mortgage payments of under £51,000.
14. As a guide, the Government said the following types of business should be a priority for funding:
• small businesses in shared offices or other flexible workspaces;
• 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.

However, councils could decide whether a business was similar and, if so, whether it was eligible for grants.

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 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.

Government FAQ for councils

17. The Government published FAQs for councils on its guidance. Relevant to this case, the FAQs say:

“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 businesses 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.”

18. “Is there scope to provide grants to businesses without premises costs?

There is discretion for Local Authorities to pay out to businesses who do not meet the criteria the funds are primarily and predominantly designed to support and Local Authorities must decide what is right to support their local economies. However, as this funding is primarily aimed at businesses with high ongoing fixed property-related costs we expect the majority of grants to go to businesses with premises costs”.

19. Do Local Authorities have to include all four of the priority groups (Shared spaces, market traders, bed & breakfasts and charities) or can they pick which to prioritise these or other businesses?

The funding provided may not cover these groups and other businesses in need in the area. This fund is designed to primarily and predominantly support small and micro businesses, while allowing Local Authorities to exercise their local knowledge and discretion on what particular needs exist within their area. The above list, presented in para 24 of the guidance, provides some priority groups that were not eligible for the Small Business Grants Fund or Retail, Hospitality and Leisure Fund and which Government is asking Local Authorities to prioritise for this scheme”.

This Council’s discretionary grant policy

The Council’s scheme had three phases. In phase 1, which was open until 15 June 2020, eligible business were:

• small businesses in shared spaces in a commercial property;
• market traders with fixed property costs;
• bed and breakfast properties listed for council tax instead of business rates; and
• charities, which would meet the criteria for small business rate relief or rural rate relief but were not in receipt of charitable relief.
1. To be eligible the business must also:
• have been trading on 11 March 2020;
• be small, with fewer than 50 employees;
• have relatively high ongoing fixed property-related costs;
• be able to demonstrate that they had a significant drop in income due to COVID-19 restriction measures;
• have certain ongoing property costs. To be considered for a grant of £5,000 the business must have ongoing property costs of at least £200 per month (£2,400 to £7,200 per year); for a grant of £10,000 the ongoing property costs must be over £600 per month (over £7,200 per year); and
• complete an online application and provide relevant evidence.
2. In phase 2, which was open until 12 July 2020, the scheme was extended to include the following:
• private nurseries that are eligible for the Nursery Discount but who were not eligible for support under the Small Business Grants Fund or Retail, Hospitality and Leisure Grants Fund;
• small manufacturing businesses with small retail outlets within the property that sell to the public;
• businesses involved in supplying goods to the Retail Hospitality and Leisure Industry but who were ineligible for support from other grant schemes as they did not retail to the public; and
• not for profit organisations with a rateable value in excess of £51,000 where the main purpose is for Retail, Hospitality and Leisure.
3. In phase 3, which was open until 2 August 2020, the scheme was extended to the following:
• small manufacturing businesses, held in the rating list with a rateable value of less than 51,000; for the purpose of this grant a manufacturing business is described as any business that uses raw materials, parts, and components to assemble finished goods; and
• businesses eligible for Expanded Retail Discount with a rateable value of between 51,000 and 100,000.

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 applied for a discretionary grant in relation to his business using the online application form. He said this was difficult to do without a business rates reference. It is unclear exactly when Mr X made the application, but the Council considered it in late July 2020, which suggests it was considered under phase 3 of its discretionary scheme.
25. Mr X told us the Council had not asked him for information about property-related costs for the business. He said 20% of his home was used for businesses purposes and this proportion of his mortgage costs are shown as business costs on his tax returns from 2001 onwards.
26. The application form, which I have seen, asked: “What is the monthly rent, rates or businesses mortgage you pay for the commercial unit you occupy?”. Mr X responded “N/A” presumably because his business was based at a residential address. In response to a question about the proportion of the unit the business used, Mr X stated 5%.
27. The Council’s decision-making record dated July 2020 shows it established Mr X’s business had suffered a significant drop in income as a result of the COVID-19 restrictions. However, the record stated:
• there were no fixed property costs because Mr X was a “home worker”;
• the business was not liable for business rates; and
• there was no annual rent or mortgage because Mr X was a “home worker”.
28. The officer noted Mr X was a “home worker and that’s not part of eligibility criteria” (sic). The record stated the criteria was met but in relation to the amount of grant, it stated “Home worker/no fixed costs”.
29. The Council wrote to Mr X on 13 August 2020 refusing to award a grant. It said: “as you are working from home and therefore do not fulfil the criteria under the category of ‘small businesses in shared offices or other flexible workplaces in a commercial property’ your business is not eligible to receive the Discretionary Grant”.
30. Mr X wrote to the Council in August 2020 to say he was disappointed with the Council’s policy decision to ignore the Government advice about businesses operating from a property that did not pay business rates. He listed other councils that were providing grants to home-based businesses. He provided information about the businesses he and Mrs X ran from the property and explained they had bought a larger property specifically to support their businesses. He said they would now have to sell their home due to the Council’s lack of support.
31. The Council reviewed its decision and wrote to Mr X in mid-August 2020. It said:
• it agreed it was not prevented from introducing a scheme to support home-based businesses;
• there was limited funding available and the Government had asked it to prioritise businesses with fixed property-related costs; and
• it accepted Mr X’s business suffered a significant drop in income but the property costs criteria was not met so it upheld the decision to refuse to award a grant.
32. Mr X made a formal complaint and the Council responded in mid-September 2020. It said the Government had given councils discretion to create a scheme based on local circumstances whilst giving consideration to some suggested priority categories. It understood Mr X’s frustration but his business did not fall within the scope of its scheme, which it was satisfied was created in line with the guidance.
33. In response to our enquiries, the Council provided a record of its decision-making when it adopted its discretionary grants scheme. This does not show whether or how it considered the impact of excluding home-based businesses from its scheme.
34. Also, in response to my enquiries, the Council said it had intended to exclude home-based businesses, which it considered was in line with Government guidance that said the intention was to support businesses with fixed property-related costs. It said “business rent, business rates and business mortgages were considered to be the greatest property related costs and the impact on home-based businesses without the cost of premises was not as great as the impact on business with premises”.
35. In response to an earlier draft decision, the Council added that it understood the category under which Mr X applied – “small businesses in shared offices or other flexible workspaces” – applied to business premises only. It said it understood this because the examples for that category set out in the Guidance were all types of business premises. Further, it said it was advised, in an online briefing by the sponsoring Government department, that it was not the Government’s intention that this category would apply to home based businesses. It has provided a copy of its notes from that briefing. Therefore, it did not consider it needed to justify excluding home based businesses from that category in its decision record when devising its discretionary scheme.
36. In relation to the complaint about disclosing information to a third party, the Council said it responded to an information request from an MP in line with its processes but had not kept a record of the communication. It said it had also spoken to Mr X about the application, which Mr X disputes. However, it did not keep records of telephone calls in relation to grant applications.

My findings

37. The Council refused a discretionary grant because Mr X’s business was not in occupation of business premises. I cannot say what the Council should have decided in Mr X’s application. Rather, I can look at how it reached its decisions and whether it followed a proper decision making process.
38. The Government gave councils wide discretion when designing their discretionary schemes. This means the Council had discretion to prioritise or exclude certain businesses. However, it had to follow a proper decision making process in doing so.
39. Government guidance allowed 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 (see paragraph 17 above). Government therefore expressly envisaged there would be circumstances where home-based businesses, paying council tax, could be eligible for the grants. However, the guidance was not explicit about whether this applied to all the categories it asked councils to prioritise.
40. I recognise that following the Government announcement of funding for discretionary grant schemes, the Council had little time to prepare its scheme and, if it had had longer to prepare, its scheme and its decision-making records may have been more detailed. I am mindful that the Council’s scheme was largely in line with Government guidance, and it did have some records of how it decided its scheme. I also note that its published scheme was clear that small businesses in shared offices or other flexible workspaces would only be eligible if based in a commercial property.
41. That said, I would still have expected the Council to record its reasons for excluding home based businesses, including which categories they were excluded from. The Council’s decision-making record does not include any reference to how it considered home based businesses. However, taking into account all the circumstances, I do not consider this this meets the threshold for a finding of fault.
42. The Council rejected Mr X’s application for a grant because his business was based at a residential address. This decision was in line with the Council’s published scheme and therefore it was not at fault.

Disclosing information to a third party

43. There are no records of telephone calls, other than the record summarising the actions taken to consider the grant application. Therefore, I cannot reach any conclusions about what happened or what information was shared. Although Mr X is clear that he did not give consent to the Council to share information with his MP, it appears the Council responded to a routine enquiry from the MP, prompted by Mr X contacting the MP. If Mr X is concerned that personal information was shared without his consent, he may wish to refer this to the Information Commissioner.
44. The Council should ensure it records all calls of substance and it would have been better for the Council to keep a record of all telephone calls relating to grant applications. However, in this case the application record clearly shows the information it considered when deciding the application and it is unlikely the contents of any telephone discussion affected this. I am also mindful of the large volume of applications the Council would have been considering in a short period of time early in the COVID-19 pandemic. Therefore, I do not consider this warrants a finding of fault.

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Final decision

45. I have completed my investigation. I have not found fault.

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Investigator's decision on behalf of the Ombudsman