Summary: Ms X complains the Council set an arbitrary ceiling level in respect of rateable value when determining the criteria for its discretionary grant scheme. There is no evidence of fault in how the Council set the criteria for the discretionary grant scheme. Ms X’s business did not qualify but this was not as a result of fault by the Council.

The complaint

1. Ms X complains the Council’s COVID-19 discretionary grant scheme set an arbitrary ceiling level for rateable value which excluded her business.
2. She says the business has suffered financially.

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The Ombudsman’s role and powers

3. 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)
4. 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”.
5. 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

6. As part of the investigation, I have:
• considered the complaint and the documents provided by the complainant;
• made enquiries of the Council and considered the comments and documents the Council provided;
• discussed the issues with the complainant;
• sent my draft decision to both the Council and the complainant and invited their comments.

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What I found

Grant Funding Schemes

7. In response to the COVID-19 pandemic the Government introduced two grant schemes to support businesses. The Department for Business, Energy and Industrial Strategy published guidance for councils on how to apply these: “Grant Funding Schemes” (March 2020).
8. Businesses which, on 11 March 2020, received Small Business Rates Relief (“SBRR”) could be eligible for a Small Business Grant (“SB Grant”) of £10,000. Eligibility for SBRR is subject to s43 of the Local Government Finance Act 1988. This says the rate applies to occupied businesses.
9. Businesses which, on 11 March 2020, would have received the Expanded Retail Discount were eligible for a Retail, Hospitality and Leisure Grant (“RHL Grant”) of up to £25,000. The Expanded Retail Discount applied to occupied businesses that are mainly used for retail, hospitality or leisure.
10. Funding was payable to the person recorded as the ratepayer in respect of the business on 11 March 2020. However, where a council had reason to believe the information they held about the ratepayer on the 11 March was inaccurate they could withhold or recover the grant and take reasonable steps to identify the correct ratepayer.

Expanded Retail Discount (the “Discount”)

11. In April 2020 MHCLG published “Business Rates, Expanded Retail Discount 2020/21: Coronavirus Response Local Authority Guidance”.
12. The Discount was available to premises wholly or mainly used for retail, hospitality or leisure.
13. The guidance listed the types of businesses that were eligible. However, it was for councils to decide if a business was broadly similar in nature to those listed and so eligible.

COVID-19 discretionary grants

14. In May 2020, the Government introduced a discretionary grant scheme aimed at businesses ineligible for the earlier schemes. To support the introduction of this scheme the Government published guidance contained in: “Local Authorities Discretionary Grants Fund- guidance for local authorities”.
15. Under the scheme, councils could award 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 Council had discretion over the amount of payment in each case.
16. The guidance said the discretionary grants were aimed at:
• small and micro businesses;
• businesses with relatively high fixed property costs;
• ones that had suffered a significant fall in income due to COVID-19; and
• ones that occupied a property with a rateable value of under £51,000.
17. The Government said as a guide, the following types of business should be a priority for funding:
• small businesses in shared offices or other flexible workspaces that did not have their own rating assessment;
• regular market traders with fixed building costs, such as rent, who do not have their own business rates assessment;
• bed and breakfasts which pay council tax instead of business rates; and
• charity properties in receipt of charitable business rates relief which would otherwise have been eligible for Small Business Rates Relief or Rural Rate Relief.
18. In taking decisions on the appropriate level of grant, the guidance said councils may want to take account of:
• the level of fixed costs faced by the business;
• the number of employees;
• whether businesses had to close completely and could not trade online; and
• the consequent scale of impact of COVID-19 losses.
19. The guidance said councils should publish details of their discretionary grant scheme on their website. It said this should include clear guidance on which types of business they would prioritise and how they would decide on the level of grant.

Council policy

20. The Council has provided details of its Discretionary Grant Schemes. Its first scheme, introduced in June 2020, largely followed government guidance which required the grants to be aimed at small and micro businesses; businesses with relatively high ongoing fixed property costs; businesses that could demonstrate they suffered a fall in income due to the COVID-19 crisis and businesses which occupy property with a rateable value or annual rent or mortgage payments below £51,000. The Council also decided to include certain medical businesses; businesses which would have qualified for the Expanded Retail Discount with rateable values between £22,500 and £51,000 and river based businesses with mooring or similar fees.
21. After advertising the first scheme and paying 114 discretionary grants a balance of £1,009,000 remained so the Council produced a second scheme in order to attract more applicants. It decided that any business in any sector with a rateable value of £15,000 up to the ceiling value of the scheme would be eligible for a grant of £10,000. It set the ceiling value at £25,000.

Key facts

22. Ms X works for a company that sells luxury food to members of the public and to the retail, hospitality and leisure industry. Ms X says she applied for Small Business Rate Relief and the Business Support Grant on 17 April 2020.
23. On 1 July Ms X emailed the Council saying that she had made numerous telephone calls to the business rates department which told her the application had not yet been assessed due to a large backlog. Ms X asked why after 10 weeks her application had not been determined.
24. The Council responded on 18 July explaining that in order to qualify for a RHL Grant the business first needed to qualify for the Discount. It said that to qualify for the Discount the premises would need to be occupied by a business that is wholly or mainly being used as shops, restaurants, cafes, drinking establishments, cinemas and live music events. It said that Ms X’s business operates from a warehouse and is essentially selling products online to the public as opposed to being “wholly or mainly” a retail outlet such as a shop or restaurant which is reasonably accessible to visiting members of the public. The Council said that Ms X’s business would not qualify for the Discount and therefore the associated grant was not payable.
25. Ms X contacted the Council again on 20 July and asked if the business would be eligible for a discretionary grant. She said she had tried to apply for a discretionary grant online but it asked her to confirm she did not pay business rates and so she did not proceed with the application. She urged the Council to use its discretion to help the business.
26. The Council responded to Ms X on 1 September. It apologised for the delay in responding and said that her business did not qualify for the discretionary scheme. It said this was because the business’ rateable value was £31,000 and so exceeded the Council’s higher limit of £25,000 so she was unable to make a claim.
27. Dissatisfied with the lack of any financial support, Ms X complained to the Ombudsman.

Analysis

28. Ms X’s business has a rateable value of £31,000 meaning she was not eligible for the Small Business Grant. She applied for the RHL Grant but the Council said the business was not eligible as it is a warehouse selling to the public online and so not reasonably accessible to visiting member of the public. Ms X did not argue the Council’s assessment was incorrect. She responded to this refusal asking if it would consider her eligibility for a discretionary grant.
29. Although Ms X did not formally apply for a discretionary grant, the Council did explain to her that she would not have been eligible. The Council was awarded £2.149 million to award as discretionary grants. When determining the criteria for its discretionary grant scheme, the Council considered information about businesses in its area and the impact of COVID-19. It concluded there were approximately 10,000 businesses that could be eligible under the discretionary scheme but it had little or no information about their property costs. It decided that as well as the criteria set by government it would include other specific businesses. I find no fault in how the Council devised and adopted this scheme.
30. The discretionary scheme went live on 4 June and accepted applications for 12 days. It received 270 applications and awarded 114 discretionary grants. As over £1 million remained the Council considered how to distribute this remaining money. It was again concerned about how to set the criteria to ensure the scheme was not over or under subscribed. It therefore decided to follow the principle of the governments small business grant scheme using rateable value as a key determinant of eligibility.
31. It took the view that non-retail, leisure or hospitality businesses occupying premises with a rateable value just over £15,000 missed out on support compared to their competitors. It therefore decided to set a rateable value ceiling limit. The amount determined was £25,000. Ms X argues the ceiling limit was arbitrary but the information provided indicates the Council carefully considered the level that should be set in order to manage the number of applications in relation to the amount of funding still available. I find no fault in how the Council devised and adopted this scheme.
32. Ms X’s business did not qualify for the discretionary grant under either of the two schemes. The Council had to follow Government Guidance when deciding the criteria for its discretionary scheme. It also considered and added other qualifying criteria. It said while there were not enough businesses in its area which met the governments preferred criteria, there were too many other businesses to provide funding to all businesses not included in the government mandated schemes. Ms X’s business did not fall into the government criteria or the additional criteria determined by the Council. While this is frustrating and disappointing for Ms X, she was not refused the discretionary grant as a result of fault by the Council.

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Final decision

33. I will now complete my investigation as there is no evidence of fault in this case.

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Investigator's decision on behalf of the Ombudsman