Summary: Mr X complains about the Council’s refusal to award his business a grant, causing financial loss. We find no evidence of fault in how the Council decided on Mr X’s request for a discretionary grant.

The complaint

1. Mr X complains the Council wrongly refused his business a discretionary grant, applying its policy incorrectly. He says his business has suffered financially as he could not open during the COVID-19 pandemic and he has not had the benefit of the grant.

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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. 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. 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

5. I spoke to Mr X and I reviewed documents provided by Mr X and the Council.
6. I gave Mr X and the Council the chance to comment on a draft of this decision. I considered any comments provided before finalising my decision.

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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 and Self-employed Income Support 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 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 paid 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 was 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.
14. In taking decisions on the appropriate level of grant, councils had 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 had to set out their discretionary grant scheme on their website, providing clear guidance on which types of business are prioritised, and how they would decide on the level of grant.

Council decision making

16. The Council has provided a copy of a report on its proposed discretionary grant fund policy, dated 22 May 2020. This sets out the Government guidance and confirms the Council discussed how to identify those businesses that best met the criteria within.
17. The Council commented on each of the four Government priority categories. Of relevance to this case, the Council considered small businesses in shared offices or other flexible workspaces excluded those hot desking, such as hairdressers that rented a chair.
18. In addition to the four Government priority areas the Council added two further local priority areas. Its reasoning was that this supported both the Government intentions and local knowledge to recognise the challenges faced by smaller businesses this time.
19. The Council has also provided a record of its decision, taken on 22 May 2020, to implement its proposal.
20. The Council has provided a copy of a report on a proposed phase two of its discretionary grant fund policy, dated 30 July 2020. This explained it had funds remaining after phase one and so the Council was able to support further businesses. The Council identified those businesses it wanted to support. Its reasoning was that this supported both the Government intentions and local knowledge to recognise the challenges faced by smaller businesses this time.
21. The Council has also provided a record of its decision, taken on 30 July 2020, to implement the policy proposed.

Council discretionary grant policy

22. The Council provided information about its policy on its website.
23. This explained it aimed funding at small businesses with ongoing fixed property-related costs. Businesses had to be small, have under 50 employees and be able to demonstrate that had suffered a significant drop in income due to the Coronavirus restriction measures.
24. The Council would support the four priority areas identified by Government and additionally two local priority areas.
25. Of relevance to this case was the application of the policy to small businesses in shared spaces. Businesses under this category must have had: 
• No individual business rates assessment, intended for businesses occupying area in a larger single assessment.
• A contractual interest in the relevant area of the master property for a minimum of 6 months with a minimum termination notice of at least 1 month.
• Fixed property costs not exceeding £51,000 per year, with a minimum rent of £500 per year.
26. Grants of £5,000 were payable. This phase closed on 19 June 2020.
27. The Council had remaining funds and so ran a second phase of funding.
28. Under phase two, businesses had to:
• be a Small or Micro business
• have been active and trading on 11 March 2020.
• have fixed costs, not exceeding £51,000 per year.
• be able to show they had suffered a significant loss of income due to the COVID-19 crisis.
• not be eligible to, or have received cash grants from any central government COVID-19 related scheme (apart from Self Employed Income Support Scheme - SEISS).
29. The Council would support:
• those businesses that missed out on a business grant as they were not yet on the rating list on 11 March,
• local businesses with a single business premises and a rateable value between £15,000 and £51,000, and;
• parish and town councils not eligible for the business grants.
30. This phase closed on 28 August 2020.

What happened

31. In May 2020 Mr X applied to the Council for a discretionary grant. He provided a copy of a contract and three invoices in support.
32. In view of the contract I note:
• This was a contract for a “catering assignment” for one year.
• A club contracted with Mr X for him to provide food at its business premises.
• The club would provide Mr X with premises for creating the food and he could use its utilities for those purposes.
• Mr X had to pay the club £208 per month. The contract does not say what this payment is for.
33. The invoices show the club invoiced Mr X for “catering rent” in the sum of £208 per month.
34. The Council has provided a copy of Mr X’s application with its own comments added on 14 July. The Council noted:
• No evidence of fixed or property related costs.
• Catering assignment contract says the club will provide premises. Use of phone/electricity is included for the purpose of carrying out catering services.
• “Employed as contractor basis”.
35. On 15 July the Council wrote to Mr X refusing a grant as he had no ongoing fixed property related costs as required.
36. Mr X disputed this as he had provided evidence to show he paid rent of £208 per month.
37. The Council provided a further response in September 2020. It explained the Government asked it to support businesses who did not have their own separate rating assessment and were not liable to pay business rates, but were operating in a larger space, owned by another ratepayer. While the invoice provided referred to kitchen rent, this was not a contractual rental agreement for the space and the Council did not consider this to be a fixed property cost in the same way as a contractual rental agreement.
38. Mr X told the Council he had provided three rent receipts and a copy of a contract for a minimum period of 6 months showing rent due monthly. He felt he met the criteria set in the Council’s policy.
39. The Council told Mr X a contractual interest was one that would be set out in any lease or tenancy agreement for a business premises. His agreement was for a catering assignment. The contract said “the contractor will be provided with the premises for the purpose of creating and providing food. Utilities are provided free of charge for the performance of the assignment’. The agreement made clear he was not responsible for the property or related costs. These were provided free of charge for the purpose of his assignment as catering contractor. Although payment to the business was set out under the contract, this appeared to be payment as part of his assignment as contractor. It did not accept this as evidence of ongoing property related costs in the form of rent.
40. In response to enquiries the Council further explained Mr X held a contract for a catering assignment, not a rental contract or lease. It was a service contract, or employment, with facilities provided, rather than the creation of a contractual interest in the property. Although a monthly sum was payable the assignment did not create a contractual interest in the property. The agreement and payment was in relation to the catering assignment; there was no contractual interest vested in the property under the agreement. Its scheme required eligible businesses to have a contractual interest in the relevant area of the property, fixed property costs and minimum rent of £500 per annum.

Findings

41. Councils could create their own discretionary grant scheme having regard to the Government guidance. However, we expect councils to have followed a proper decision making process in doing so.
42. The Council’s records show it considered the Government guidance and decided to adopt a policy mirroring the guidance. At phase one it decided to support the four priority areas identified by the Government in addition to two local priorities. It recorded its decision and reasons at the time. At phase two the Council extended its scheme to cover three additional categories of business. Again, it recorded its decision and reasons at the time. On the evidence I have seen, I am satisfied the Council followed a proper decision making process.
43. Government guidance was for councils to support businesses with relatively high fixed property costs and the Council’s policy at phase one reflected this. I consider it was for the Council to decide how applicants could best evidence this. The Council required applicants to evidence these costs by demonstrating a contractual interest in the property, annual rent payments and any other fixed property costs.
44. The Council refused Mr X a discretionary grant under phase one of its scheme as it considered he could not evidence high fixed property costs as defined by its scheme. The Council has explained its view that Mr X had a contract to provide services rather than a contractual interest in the property itself. And that the “rent” paid was not to rent a space within the property but rather a payment related to the assignment. I acknowledge Mr X disagrees with the Council’s judgement however, I find it followed a proper decision making process. It took account of all the information provided, relevant law and policy before reaching its decision. I am therefore unable to find the Council at fault.
45. I have not seen any evidence the Council considered whether Mr X’s business was eligible for a grant at phase two of its scheme. However, I note his business did not fall within one of the additional categories supported. As I have found the Council decided on phase two of its scheme properly, I find no fault in this regard.

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Final decision

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

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Investigator's decision on behalf of the Ombudsman