Summary: Mr X complained about the Council’s refusal of COVID-19 business grants. The Council was at fault for not giving adequate reasons for refusing a discretionary grant in April 2021, for which it should apologise. There was no fault with its decision making in relation to the other grant applications Mr X made.

The complaint

1. Mr X complained the Council wrongly refused COVID-19 business grants. He said the lack of support added to the financial difficulties caused by the COVID-19 pandemic.

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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. 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. I considered:
• the information provided by Mr X and the Council; and
• relevant law and guidance, as set out below.
7. Mr X and the Council had an opportunity to comment on my draft decision. I considered any comments received before making a final decision.

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What I found

Relevant law and guidance

8. In response to the COVID-19 pandemic the Government introduced various grant schemes to support businesses from March 2020 onwards.

Small business grant

9. Businesses which, on 11 March 2020, were eligible for Small Business Rates Relief (SBRR) were able to apply for a payment of £10,000.
10. Eligibility for SBBR was subject to section 43 of the Local Government Finance Act 1988. This said the rate applied to occupied businesses.
11. Grants were payable to the person recorded as the ratepayer in respect of the business on 11 March 2020. Where the council had reason to believe the information it held about the ratepayer on 11 March was inaccurate it could withhold or recover the grant and take reasonable steps to identify the correct ratepayer. The Guidance said councils should ignore changes to the rating list after 11 March 2020, even if back-dated, unless they were factually aware on that date the rating list was inaccurate. In those cases a council could withhold the grant and/or award the grant based on its view of who would have been entitled to the grant had the list been accurate.

Local Restrictions Support Grants (Open)

12. The Government provided support to businesses not forced to close but severely affected by Tier 2 and Tier 3 restrictions between 5 August and 4 November 2020. Tier 2 & 3 restrictions were localised restrictions imposed in specific areas in response to the COVID-19 pandemic. The scheme provided lump sum payments for each period of 28 days during which restrictions applied.
13. The Guidance said councils had the freedom to determine the precise eligibility criteria for these grants because they were best placed to determine local needs. However, councils were asked to prioritise “hospitality, hotel, bed & breakfast and leisure businesses”.
14. This Council’s scheme said to be eligible the business must:
• be in Kirklees
• be a leisure, hospitality or accommodation business
• occupy premises registered for businesses rates (businesses that did not pay rates directly to Kirklees Council, for instance businesses in shared workspace or bed & breakfasts who pay Council Tax rather than Business Rates were eligible to apply but would be required to supply additional evidence of occupation, for instance a rental agreement or invoice)
• have been open and trading as usual before the restrictions
• have been providing services in person to customers from the premises
• have been severely impacted by Tier 2 restrictions
15. Hospitality venues included cafes, restaurants, pubs, bars and social clubs.

Local Restrictions Support Grants (Closed) Addendum

16. The Government provided support to businesses forced to close during the second national lockdown from 5 November to 2 December 2020. This was later extended to cover the third national lockdown from 5 January to 31 March 2021.
17. Eligible businesses were those required to close in line with Government restrictions. The Health Protection (Coronavirus, Restrictions) (England) (No. 4) Regulations 2020 sets out which businesses had to close by law.
18. Businesses were required to close any premises (or part of the premises), in which food and drink were provided for consumption on the premises, and cease providing food and drink for consumption on the premises. Businesses were allowed to sell food and drink (but not alcohol) for consumption off the premises either by delivery in response to orders or to a purchaser collecting pre-ordered food and drink.

Restart grant

19. Support was provided to support specific types of business, including hospitality businesses, to enable them to reopen safely after restrictions were lifted following the third national lockdown. To be eligible, the business must:
• be the liable ratepayer on 1 April 2021;
• be engaged in offering in-person services in the relevant sectors; and
• trading (engaged in business activity) on 1 April 2021.
20. The Guidance said a hospitality business could be defined as a business whose main function was to provide a venue for the consumption and sale of food and drink. It suggested councils use the following criteria to assess whether a business was eligible for a grant:
• Businesses offering in-person food and drink services to the general public.
• Businesses that provide food and/or drink to be consumed on the premises, including outdoors.
21. It said the definition of a hospitality retail business should exclude food kiosks and businesses whose main service is takeaway (not including businesses that adapted to offer takeaways during periods of restrictions).

Additional Restrictions Grant (ARG)

22. The Government also provided discretionary funding for councils to support businesses that were required to close or had been severely impacted by the second national lockdown.
23. The Guidance said councils could decide how much funding to provide to businesses and which businesses to target. Councils could use the funding to support businesses that they decided were important to their local economy.
24. The Guidance also said:

“In taking decisions on the appropriate level of grant, [councils] may want to take into account the level of fixed costs faced by a business in question, the number of employees, whether they are unable to trade online and the consequent scale of coronavirus losses”.

25. This Council’s scheme, in phase 1 (from November 2020 to March 2021) was decided in line with Government Guidance. To be eligible, the business must:
• Be trading in Kirklees;
• Have been open and trading as usual before the restrictions;
• Have been legally required to close or have been significantly impacted by local restrictions from 5 November 2020. Businesses not forced to close will be required to provide evidence demonstrating a significant impact on turnover/sale as a result of stricter social distancing being implemented;
• Be operating in one of more of the following sectors:
1. independent non-essential retail;
2. leisure;
3. hospitality;
4. visitor accommodation;
5. personal care and close contact services;
6. retail, hospitality. leisure supply chain;
7. entertainment and tourism (including events and supply chain businesses); and
8. community facilities/centres, including faith-based venues.
26. The Council still had Government funding available after administering phase 1 of the scheme. In April 2021, it agreed a phase 2, which would closely mirror the Government’s Restart grant. Businesses that had already received payments from previous ARG schemes did not need to reapply but did need to confirm their circumstances had not changed. New applicants had until 14 May 2021 to apply.
27. The published scheme said:
• The grant was only available to businesses that were not eligible for the Local Restrictions Grant (LRSG) or Restart Grant;
• The scheme would support those businesses previously required to close or severely impacted by COVID-19 restrictions to plan ahead and safely relaunch trading as restrictions were lifted.
28. Two grants were available:
• Grant 1 to support businesses occupying commercial premises with fixed property costs (for example, rent and/or business rates); and
• Grant 2 to support businesses with no ongoing fixed commercial costs, such as those operating from their home and businesses with short term rental agreements, such as hairdressers.
29. To be eligible for grant 1 the business must:
• Be based in Kirklees;
• Operate from commercial business premises with fixed property costs, for example rent and/or business rates;
• Be trading on 1 April 2021; and
• Have been closed or severely impacted by COVID-19 restrictions.
30. In addition, the business had to be operating in one of the following sectors, or their supply chain:
• Non-essential retail;
• Hospitality;
• Leisure (including gyms, sports, entertainment and events, and tourist attractions)
• Tourist accommodation;
• Personal care.
31. If eligible the business would receive a single payment, calculated according to the annual rent or rateable value, as follows:
• Annual rent/rateable value £15,000 and under £2,667
• Annual rent/rateable value £15,001 to £50,999 £4,000
• Annual rent/rateable value £51,000 and above £6,000

What happened

32. Mr X operates a fast food business. The company was registered with Companies House in June 2020. Also in June, Mr X applied for a small business grant. The Council refused this on 4 July 2020. This was because the premises were closed and being refurbished on the relevant date, which was 11 March 2020. In response to my enquiries, the Council told me it knew this because an officer had driven by. It is unclear when the officer did this but Mr X did not challenge that decision at the time, nor did he specifically complain to us about it.
33. At that stage, Mr X was not the liable ratepayer but the Council was prioritising grant payments at the time so did not query whether Mr X wanted to be recorded as the ratepayer. Mr X did not provide any evidence to show he was the correct ratepayer and did not contact the Council again about this.
34. In January 2021, Mr X applied for a Local Restrictions Support Grant (LRSG) in relation to the second national lockdown (5 November to 2 December 2020). On the application form he said the business was forced to close. He also said he was significantly affected by Tier 2 restrictions from 5 August 2020. He said he had no walk-in customers and high levels of food waste due to low demand.
35. On 11 January 2021 the Council refused the second LRSG application. It said the business was not eligible for a lockdown grant because it was a takeaway business and was not legally required to close. It also refused the Tier 2 grant application. It said this was only for businesses that were severely impacted by the Tier 2 restrictions between 5 August and 4 November 2020 and could clearly demonstrate this.
36. In response to my enquires, the Council said businesses were required to provide evidence of impact by reference to the same period the previous year, which Mr X was not able to provide because the company was only registered and began trading in June 2020. It confirmed Mr X did not provide any evidence to show the business was impacted by COVID-19 restrictions.
37. In mid March 2021, Mr X emailed to say the business was struggling and had not had any help. The Council provided a link to its discretionary grants scheme but Mr X did not apply at that stage.
38. Also in March 2021, the Council asked Mr X for evidence to show he was the correct ratepayer. Mr X provided the information the Council requested. and it amended its records in late March. It recorded the business as the liable ratepayer, back-dated to June 2020 when the company was registered.
39. On 1 April Mr X applied for an LRSG for the third national lockdown. He provided evidence the business was open and trading on 5 January 2021. He said the business had been closed during the lockdown.
40. On 8 April 2021 the Council refused the LRSG for the second national lockdown. It said the business was not eligible because it was a takeaway and was not required to close. It also said that as the business was not eligible for the LRSG, it could not qualify for the restart grant.
41. Mr X challenged the decision. He set out why he considered he had met the criteria. The business was open and trading as a takeaway only. The inside seating area could not open in line with Government guidance.
42. The Council responded on 13 April 2021. It said eligibility depended on what the main business was. In this instance, it believed the main business was a takeaway and therefore it could remain open. To be eligible for the grant Mr X would have to show that the business was mainly eating on the premises, for example, by providing a breakdown of business takings that showed this from before the restrictions. It also suggested Mr X provide photos of the inside of the business premises. It said if Mr X could provide this, it would ask its appeals team to reconsider the decision.
43. On 28 April, Mr X sent photos showing a small bar area with two bar stools and a counter for serving food. He did not provide any evidence to show the breakdown of takings. The Council reconsidered its decision. It said businesses that are predominantly takeaways were not forced to closed and so were not eligible for the LRSG for the second and third lockdowns. It did not comment on the Restart grant.
44. On 3 May 2021, Mr X applied for an ARG discretionary grant. The application stated Government rules had resulted in a “huge decrease in footfall to my shop as eating in was not available and most of my income derives from eat in customers”. It also said there was a decrease in takeaway customers. Mr X provided two bank statements, one for the period 30 January to 26 February 2021 showing receipts of £137.71 and the other for April 2021, showing a number of transfers, which do not appear to relate to takeaway sales. The Council considered the application but refused the grant on 15 June 2021 because it said the business was not in one of the eligible sectors.
45. In response to my enquiries, the Council said phase 2 of its discretionary scheme was re-aligned to mirror the main Restart Grant and takeaways were not eligible for support under the Restart scheme.

My findings

Small business grant

46. To be eligible for this grant, the business had to occupy the premises on 11 March 2020. The Council refused the grant because the premises were closed then for refurbishment. I have not seen evidence the premises were closed on 11 March, as opposed to some later date, but Mr X did not challenge this at the time.
47. In any case, the business was not the liable ratepayer on 11 March 2020. As the company was not formed until June 2020 it could not be recorded as the ratepayer in March 2020. This means the company was not eligible for the grant.
48. The Council noted Mr X was not listed as the ratepayer when he applied for the grant but had no other information to indicate its records may be incorrect. It did not make any enquiries about this but I do not consider that was fault because its priority at the time, in line with Government advice, was to deal with COVID-19 business grants, which significantly increased the team’s workload. In any case, this did not cause a significant injustice because the Council later amended its records, and the change was back-dated to June 2020. Mr X’s business did not miss out on grant support as a result of the change being made later.

Tier 2 support

49. To be eligible for this grant, the business had to be providing an in-person service to customers in the business premises. The Government defined this as a business that provided food and drink for consumption on the premises. This does not cover takeaways.
50. It was also necessary for the business to show a significant impact on turnover compared with the same period the previous year. Since Mr X’s business was established in June 2020, it could not do this. Mr X did not provide other evidence that showed the business was impacted by the COVID-19 restrictions.
51. In these circumstances, the Council was not at fault for refusing the Tier 2 support grant.

LRSG (Closed) (Addendum)

52. The Council refused LRSG grants because takeaways were not required to close during the second and third national lockdowns. It gave Mr X the opportunity to provide evidence that his business was mainly a restaurant rather than a takeaway. He provided photos showing a very small area for eating on the premises: these do not suggest the main business was eating on the premises. He did not provide evidence to show the proportion of his business that related to eating on the premises as opposed to takeaway sales. Based on the evidence he provided, the Council was entitled to conclude the main business was as a takeaway and was therefore not at fault for refusing the LRSG.

Restart grant

53. The Council refused the Restart grant on the basis the business was not forced to close during the national lockdowns. There were some circumstances in which businesses not forced to close could benefit from this scheme but takeaways were specifically excluded from this scheme. Therefore, the Council was not at fault for refusing this grant.

ARG discretionary grant

54. The Council sent Mr X a link to apply for phase 1 of the discretionary grant but he did not do so.
55. The Council refused this grant in phase 2 on the basis the business was not in one of the eligible sectors. It did not explain its reasons for deciding this in the decision letter, which was fault.
56. In its response to my enquiries, the Council said takeaways were not eligible because phase 2 of the scheme was aligned to the Restart Grant. It is clear from the internal record agreeing the scheme that the intention was to mirror the Restart grant, apart from grant 1 being paid to businesses paying rent for commercial properties but not business rates. However, the exclusion of takeaways was not specifically stated in the scheme document. That said, it is clear from other cases investigated that the Council has applied this exclusion consistently.
57. I have not seen what information was available on the Council’s website when Mr X asked about the grant so I cannot say whether this specifically excluded takeaways and therefore whether the published information unfairly raised his expectations about benefitting from this scheme. But I note Mr X’s view was that the business was a restaurant rather than a takeaway so he would not necessarily have seen an exclusion of takeaways as meaning his business was not eligible. This means it is unlikely his expectations were unfairly raised at the time he applied.
58. Although I have found fault with the lack of decision reasons, I am not recommending the Council reconsider its decision. This is because Mr X did not provide evidence that showed the business was significantly affected as a result of COVID-19 restrictions, which was requested on the application form. Therefore the application did not meet the criteria for a grant on that basis.

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Agreed action

59. The Council will, within one month of the date of the final decision, apologise to Mr X for not providing adequate reasons for refusing the ARG discretionary grant.

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Final decision

60. I have completed my investigation. I have found fault leading to personal injustice. I have recommended action to remedy that injustice.

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Investigator's decision on behalf of the Ombudsman