Summary: Mr X complains the Council wrongly refused his business a discretionary grant, causing financial risk and distress. We find fault by the Council. Though this did not affect the Council’s decision on Mr X’s grant we recommend the Council take action to prevent recurrence.

The complaint

1. Mr X complains about the Council’s decision to refuse his business a discretionary grant. He considers it did not exercise its discretion properly or take account of available information. Mr X says his business has lost the benefit of the grant and is at now at risk. He has also suffered inconvenience and distress.

Back to top

The Ombudsman’s role and powers

2. 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)
3. 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”.
4. 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)

Back to top

How I considered this complaint

5. I reviewed documents provided by Mr X and the Council. This includes copies of correspondence exchanged between Mr X and the Council.
6. I gave Mr X and the Council the opportunity to comment on a draft of this decision and I considered any comments provided.

Back to top

What I found

Discretionary grants

7. 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”.
8. 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.
9. In making payments under £10,000, councils could adapt the approach to local circumstances, such as providing support for micro-businesses with fixed costs or support for businesses crucial to their local economies.
10. 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.
• Businesses which occupy a property, or part of a property, with a rateable value or mortgage payments of under £51,000.
11. 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.
12. It considered the following types of business should be a priority for funding but this was a guide only. Councils should decide themselves if a business is similar and, if so, whether it should be eligible for grants. These businesses were:
• 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.
• Charity properties in receipt of charitable rates relief.
13. 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 are most relevant to their local economy. There will be no penalty for councils using discretion to prioritise some business types.
14. In taking decisions on the appropriate level of grant, councils may want to 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.
15. 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

16. The Government published FAQs for councils on its guidance. This says: “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.”

Council discretionary grant guidelines

17. I note the Council’s scheme mirrored the Government guidance. Its funding was aimed at:
• 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
• Business with fewer than 50 employees (full-time equivalent) i.e small business
• Businesses that were trading on or before 11th March 2020
18. The Council’s policy lists non-qualifying businesses. This included businesses operating from a domestic property, (unless as a registered Bed & Breakfast business).
19. The policy refers to the Government’s four priority business types and lists those businesses the Council considers similar and so should also be a priority.
20. The policy set outs the evidence required to support an application. Of relevance to this case, this included evidence of property costs such as rent, rates or mortgage payments above a minimum level of £250 per month.
21. The policy also says how the Council will decide on the level of grant payable.

Council discretionary grant application form

22. The application form for the Council’s discretionary grant asks applicants to say which of the following five priority areas their business falls within:
• 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.
• Charity properties in receipt of charitable rates relief.
• Business relies on 50% of its turnover from supplying the Tourism, Retail, Leisure and Hospitality sector.

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. On 24 July 2020 Mr X applied for a discretionary grant.
25. The Council has provided a copy of its response to Mr X, dated 25 July. I note the Council told Mr X its policy did not support businesses based at home and property costs had to be at least £250 per month. He had reported costs of only £600 per year and had not said where those costs were incurred. The Council requested further clarity, rent invoices and bank statements.
26. The Council wrote to Mr X again on 6 August. It said it had not received his application for a discretionary grant. It needed this by the deadline of 10 August together with copy of a lease and bank statements showing rent payments. If he was working from a home address it needed a separate lease in the business’ name or he may not be eligible for a grant.
27. Mr X told the Council he had sent his application on 24 July and received an acknowledgement. He said payment of a grant should not be dependent on property arrangements. The business’ property costs are £600 per year; it does not have other costs related to properties, leases or rent. It does not hold a formal lease but uses space within a building that has mortgage costs of £1200 per month. He referred the Council to examples in the media of other types of businesses receiving a grant. He also explained his business received office accommodation free of charge and so he could not evidence this cost. But on the open market it would cost £500 per month to rent.
28. The Council replied on 11 August. It acknowledged some councils paid grants to businesses with no office costs while others followed the Government guidance regarding fixed property related costs. It required evidence of fixed accommodation costs, regardless of whether there was a Business Rates liability. It accepted that if he leased office space from a private landlord, he could be paying at least £500 per month in rent, but it had to apply its criteria consistently. His business did not qualify for a grant.
29. On 17 August Mr X complained the Council would not apply further discretion. He told the Council his business had minimized its costs by using office accommodation provided for free by its founders. If it had set this up differently so that a cost showed on the accounts it would be eligible for a grant, but it had not known this when setting up the business. In summary Mr X raised the following points:
• The Council’s policy unlawfully excluded a whole group of virtual businesses.
• The Council had failed to exercise discretion.
• It had refused his offer of further evidence in relation to the business and its founders’ past and ongoing financial expenditure in regard to its office space costs;
• It told him it had not received his application just one working day before the deadline for applications.
• He asked the Council to reconsider its decision.
30. The Council reviewed its decision and responded on 21 September. In summary the Council:
• Confirmed it was reviewing its decision on his grant application, which it acknowledged receiving on 25 July and then asked for further information.
• Noted it had not taken into account the likely future success of the business and its endorsements; the hypothetical scenario whereby if he had rented office space he would have incurred costs or; how other councils have implemented the scheme.
• Found its policy met the requirements of the national guidance such that the policy itself was fair having due regard to: (a) the limited nature of the funds available and (b) the hardship that businesses could suffer if unable to continue to occupy the space from which they operate due to an inability to pay rent;
• Found it had followed the policy and gave consideration to those factors that it was to have regard to, whilst discounting those that it should not have had regard to; and
• Considered the communication trail showed it gave him opportunities to engage with queries about his application and he was helped to provide information that could have demonstrated compliance with the criteria, if such information had been available.
31. Mr X remained unhappy and contacted the Ombudsman.
32. In response to enquiries the Council provided evidence of its decision making on its discretionary grant scheme, outlined below.
33. The Council held an online meeting on 28 May 2020 with the Leader, Executive Members with responsibility for Finance, Place & Economic Prosperity and Housing, to discuss the scheme. The Council says it made no notes of this meeting.
34. The Council has provided a copy of an email dated 27 May, sent to members for discussion ahead of the meeting. I note this attached a draft copy of the policy. The email says the majority of the policy is the Government guidance, but paragraphs 8 and 30 specify which types of businesses it intends to assist, and what levels of grant it will be awarding. Points to discuss included:
• The types of businesses/organisations to prioritise
• Agreement of the decision making process – officers or Members
• Whether to have a local appeals process
• Whether to set a cap at £10,000 allowing more businesses to qualify
• How to treat short-term lets and AirBnB properties, which are only liable for Council Tax

35. I note the draft policy does not say home based businesses are excluded and this is not a point for discussion within the email of 27 May.
36. I have not seen any other record to show why the Council decided to exclude businesses based from home from its discretionary grant scheme.
37. The Council has provided its record of the delegated officer’s decision on the scheme dated 1 June 2020. This says:

“The criteria has been discussed with Elected Members with responsibility for Finance and Place & Economic Prosperity, and with The Leader of the Council. The criteria has been agreed to support the Government intentions, and to provide support to those businesses that provide a contribution to the local economy.”

38. In comments on my draft decision Mr X said the Council’s policy did not specifically exclude businesses operating from a private address or those where the premises were provided “for free” yet the Council behaved as though it did. The Council’s policy discriminated against virtual companies like his that were good at minimising property related costs.

Findings

39. The Government guidance was for councils to support businesses with relatively high fixed property costs. The Council applied this to its own policy and interpreted this to mean a business should have property costs of at least £250 per month to qualify for a grant. I consider the Council decided this aspect of its scheme properly, in line with the guidance.
40. Mr X told the Council his business had costs of £600 per year and no other fixed property costs as it was given office space for free. The Council considered the information Mr X provided showed he did not have property costs of at least £250 per month as required under its scheme, and so he was not eligible for a grant. I consider the Council’s decision to refuse Mr X a grant on this basis was in line with its policy and the Government guidance. The Council decided it had enough information to reach a decision. Although Mr X offered further information, the Council did not have to consider this where it thought this would not affect its decision. I find no fault in this regard.
41. I recognise Mr X did not have high property related costs and I acknowledge his comments that the Council’s approach discriminated against virtual businesses with typically low property costs. However, the Council’s policy to support businesses with high property costs reflected guidance issued by central Government. We expect councils to follow such guidance.
42. I note there was some confusion as to whether the Council received Mr X’s application. However, this did not prevent the Council considering the application in time and this did not affect the decision outcome. I therefore find no fault causing injustice.
43. The Council had an additional reason for refusing Mr X a grant; that home based businesses did not qualify under its scheme. I note its policy specifically excluded businesses operating from a domestic premises. While councils have discretion which businesses to support, this discretion should be exercised properly. We expect to see written records of the Council’s decision making and reasons to support its decision. I find the lack of records on this point amounts to fault. While this did not affect the outcome on Mr X’s application, the Council should ensure it keeps proper records in future.

Agreed action

44. In view of my findings above, I recommend the Council take the following action within one month:
• Remind staff of the need to keep written records of their decision making in line with the Ombudsman’s Principles of Good Administrative Practice.
45. The Council has accepted my recommendation.

Back to top

Final decision

46. I find fault in the Council’s decision making process that did not cause injustice to Mr X but could cause injustice to others. The Council has accepted my recommendation and I have completed my investigation.

Back to top

Investigator's decision on behalf of the Ombudsman