Summary: Mr X complained the Council unfairly excluded home-based businesses from its COVID-19 Local Restrictions Support Grant scheme. He also said the Council gave misleading information about its grant schemes and failed to exercise discretion. The Ombudsman found the Council was at fault for not keeping a record of its decision-making. However, the fault did not cause Mr X an injustice. The Ombudsman did not find evidence the Council misrepresented its grant schemes.

The complaint

1. Mr X complained the Council unfairly excluded home-based businesses from its COVID-19 Local Restrictions Support Grant scheme. He also said the Council gave misleading information about its grant schemes and failed to exercise discretion.
2. Mr X said the Council caused him to suffer distress, inconvenience, and unnecessary time and trouble.

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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. 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. 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”.

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How I considered this complaint

6. As part of the investigation I have considered the following:
• The complaint and the documents provided by the complainant.
• Documents provided by the Council and its comments in response to my enquiries.
• Local Restrictions Support Grant (Closed) – guidance for local authorities.
• Local Restrictions Support Grant (Open) – guidance for local authorities.
• Local Restrictions Support Grants and Additional Restrictions Grant – Frequently Asked Questions.
• Guidance for applications to North Tyneside Council for Local Restrictions Support Grant
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

8. In March 2020, the government created schemes for councils to pay grants to small businesses and retail, hospitality and leisure businesses. This was because the COVID-19 restrictions affected so many of them.

Local Restrictions Support Grant (LRSG)

9. The Government introduced the Local Restrictions Support Grant to help businesses required to close from November 2020 due to COVID-19. Eligible businesses were those mandated to close by the Government and included non-essential retail, leisure, personal care, sports facilities, and hospitality businesses.
10. The Local Restrictions Support Grant (Open) was to help businesses linked to the hospitality, hotel, bed and breakfast and leisure sectors. Eligible businesses were those that remained open, but were severely affected by the tiered local restrictions which were in place from 14 October and 02 December 2020 onwards.
11. Government guidance stated it was up to each council to decide which types of business to prioritise for the LRSG (Open) fund, based on their local economy. The Government confirmed there would be no penalty for councils choosing to prioritise some business types over others.
12. The Government guidance said local councils can collaborate to ensure regional consistency if they wish.

Additional Restrictions Grant (ARG)

13. 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.
14. The Guidance, issued on 4 November 2020, 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 were important to its local economy.

The Council’s Local Restrictions Support Grant guidance

15. The Council had one guidance document which covered both its LRSG (Open) and (Closed) schemes. Regarding open businesses, where the Council had discretion, it aimed its scheme at hospitality, accommodation, and leisure businesses.
16. Businesses had to demonstrate they were severely impacted by local or national restrictions to qualify for the Council’s LRSG (Open) fund.
17. The Council’s guidance states businesses are not eligible for support if they are operating their business from home.

What happened

18. I have summarised below some of the key events leading to Mr X’s complaint. This is not intended to be a detailed account of what took place.
19. Mr X runs his business from home and sometimes from client business premises. He applied for a discretionary grant in June 2020, but the Council refused. It said home-based businesses were not eligible.
20. Mr X complained to the Ombudsman about that decision. We found the Council at fault for failing to give reasons about how it prioritised businesses for the first phase of its discretionary grant scheme. However, we did not find this caused Mr X any injustice because the Council did give reasons at phase two of the scheme, and the decision would have been the same.
21. In November 2020, local councils in the area discussed taking a consistent regional approach to their LRSG and ARG funds. This was agreed at a meeting of local council chief executives on 10 November.
22. Mr X contacted the Council on 17 November 2020 to ask why it excluded home-based businesses from its LRSG scheme.
23. The Council said it did not have enough funding to support all businesses and it had been working with seven local authorities to deliver a consistent LRSG scheme based on Government criteria. It said it may allocate any remaining funds to other businesses, depending on demand.
24. Mr X made a formal complaint. He questioned whether the Council was best placed to decide local needs for supporting recovery when it had not done any policy and equality assessments first. He said the Council had excluded and discriminated against small business owners operating from home.
25. The Council responded to Mr X’s complaint on 18 December 2020. It said it had no duty to carry out local assessments in setting up its grant schemes. It worked with other local councils and used its discretion to refine the Government’s eligibility criteria, based on its knowledge of the local economy.
26. The Council said the funding it received for its LRSG fund had not been enough to support home-based businesses so far. It also told Mr X about other schemes he may be eligible for.
27. Mr X was unhappy with the Council’s complaint response. He said the Council misrepresented the position about grants issued to home-based businesses by other local councils. He said one local council issued discretionary grants to home-based businesses. He asked the Council to consider his complaint again.
28. The Council sent its stage two complaint response on 21 January 2021. It said:
• There was no requirement for the Council to do impact assessments specifically for the COVID-19 grant schemes. It issued grants based on the Government’s criteria and the Government encouraged councils to pay grants to businesses as soon as possible.
• Officers held discussions with other local councils before the Council launched its discretionary grant scheme in June 2020. No local councils were supporting home-based businesses at the outset. After the Council’s discretionary grant scheme closed, it learnt another local council launched a phase two grant and did support a few home-based businesses who showed high, ongoing, fixed property costs. The Council said the information it gave Mr X was correct at the time it was provided.
• It did not receive enough funding to support all businesses through the LRSG.
• The LRSG funding is to support businesses severely impacted by the restrictions and includes businesses which supply the retail, hospitality, and leisure sectors or businesses in the events sector.
• Officers from all local councils met to agree how to use the LRSG funding to support businesses, based on their local knowledge. The plans were then agreed by council leaders. All local authorities agreed there was not enough funding to open the scheme to home-based businesses because they were not required to close and generally had lower fixed business costs.
• The Council is using additional Government funding through the ARG to widen the number of businesses able to apply for LRSG.
29. Mr X remained unhappy with the Council’s complaint response. He did not consider the Council had addressed how it determined local needs for supporting the recovery when it had not completed policy and equality assessments.
30. The Council sent its stage three response on 17 February 2021. It said:
• It was not notified by another local council that they were supporting any home-based businesses at the time the discretionary grant scheme closed. The Council recognised Mr X told a local councillor but said this was after his original complaint and he did not tell any Council officers.
• Its own discretionary grant scheme was over committed and closed before it could consider opening it to home-based businesses.
• Mr X’s disagreement with comments from the previous complaint response was not in itself grounds for a complaint.
• The other local council Mr X referred to did not open its discretionary grant scheme to home-based businesses. It decided to support a small percentage of home-based businesses that could show regular commercial property costs in phase two of its scheme.
• It did not agree it misrepresented facts or misinformed Mr X. It said it was correct that officers held discussions with other local councils, but it is also correct that each council is free to target their grant schemes as they see fit. It said it was also correct that no other local council was supporting home-based businesses at the outset. It did not misrepresent the facts by saying home-based business were not eligible under its own scheme.
• It had no duty to carry out policy or impact assessments in delivering the grant schemes.
• Its statement councils had limited discretion is correct. It said its discretion is restricted by Government guidance and each council had the right to use their discretion to adjust their schemes to local circumstances. It could not comment on how other councils decided to support home-based businesses.
31. Mr X brought his complaint to the Ombudsman on 19 May 2021.

Response to enquiries

32. The Council told me officers from seven local councils met online weekly from April 2020 onwards to discuss the various grant schemes. They shared best practice and aligned their approach to minimise regional differences.
33. The Council said the Government directed councils to get funding to businesses as soon as possible, so it did not commission any new external research. It relied on existing research and local knowledge.
34. The Council said the Government guidance for the LRSG fund told councils to target hospitality, hotel, bed and breakfast, and leisure businesses. Councils had to provide funding based on tiers linked to business rates, unless there was a local economic need to deviate. The Council interpreted the guidance to mean LRSG support was only for business rates payers, not home-based businesses.
35. The Council told me it was not aware of any economic need to support home-based businesses in its area which meant it should deviate from the priority sectors in the guidance.
36. The Council said it received LRSG funding from the Government based on estimates from the Valuation Office Agency about the number of business rates payers in the Government’s priority sectors. The Council did not receive enough funding to support businesses outside the priority sectors.
37. The Council told me it does not have a written record of its decision-making in setting up its LRSG fund because it did not deviate from the Government guidance.
38. The Council said the ARG scheme ran alongside the LRSG, and it made that scheme open to home-based businesses. Mr X’s business received the ARG.

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Analysis

39. Mr X’s complaint about the Council’s discretionary grant scheme has already been considered by the Ombudsman, so I will not revisit it.
40. New to this complaint, Mr X said the Council misrepresented the position about the regional stance local councils took on the discretionary grant scheme. This was after he found one council did issue discretionary grants to some home-based businesses.
41. I found no evidence the Council misrepresented the position. On the evidence seen, local councils did initially take a joint stance. The Government confirmed councils could do this if they wished, but they did not have to.
42. The fact another council in the area later adopted a different approach by helping some home-based businesses does not undermine the Council’s approach and does not mean the Council acted with fault. I have not seen evidence the Council misled Mr X about this.
43. Mr X also said the Council misrepresented the facts when it told him local council leaders agreed to coordinate their approach to the LRSG and ARG.
44. Again, I found no evidence the Council misrepresented the facts. On the evidence seen, local council officers discussed the schemes and council leaders then met and agreed to approach the schemes in a consistent manner.
45. The Government asked councils to prioritise certain groups for their LRSG (Open) funds. However, councils had discretion to decide how this fit with local businesses and priorities.
46. I appreciate Mr X feels it was unfair for the Council to exclude home-based businesses, and I do not dismiss his complaint, but it was a decision the Council was entitled to make.
47. The Government guidance did not require councils to undertake impact assessments before setting up their schemes. The Government confirmed councils would not be penalised for prioritising some business types over others.
48. The Council relied on its local knowledge and previous research in deciding which businesses to prioritise. It considered home-based businesses had lower property costs and, because its funding was limited, decided they should be excluded.
49. The Council published guidance for LRSG funds on its website. Its guidance is clear about which business types are eligible for support.
50. Mr X considers the Council misrepresented the facts about the eligibility of home-based businesses. He said the Council had absolute discretion.
51. The Council did have discretion for the LRSG (Open) funding, but that does not mean it acted with fault by excluding home-based businesses. Giving councils discretion meant they could prioritise local businesses they wanted to help but also meant they could exclude businesses not considered a local priority. I have not seen evidence the Council misrepresented the facts. It was not fault for the Council to tell Mr X home-based business were not eligible for support under its LRSG scheme.
52. However, in circumstances where it was the Government’s intention that funding schemes are at each council’s discretion, based on local economic factors, we would expect to see a written record of the Council’s decision-making. I appreciate the Council, in its view, did not deviate from the Government guidance, but we would still expect a record confirming that decision. The lack of a record amounts to fault.
53. I do not consider the Council’s fault caused Mr X an injustice. The Council provided the Ombudsman with reasons why it chose not to support home-based businesses so, irrespective of any fault, Mr X’s business was still not eligible for Council’s LRSG funding.
54. Mr X said the Council put him to unnecessary time and cost because it gave misleading information or did not answer his questions.
55. However, the Council’s guidance was clear, and it consistently confirmed home-based businesses were not eligible for support under its LRSG scheme.
56. The Council also considered Mr X’s complaint at all three stages of its complaints process, which included a review committee. I have not seen evidence the Council ignored Mr X or refused to answer his questions.
57. In summary, Mr X disagreed with the Council’s responses, and with its explanations of what took place. He said it amounted to misrepresentation. Mr X is entitled to his view, but the Council did engage with Mr X’s complaint and did provide full responses. The fact Mr X disagrees does not mean the Council is at fault.

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Final decision

58. I have completed my investigation. The Ombudsman found the Council was at fault for not keeping a record of its decision-making. However, the fault did not cause Mr X an injustice. The Ombudsman did not find evidence the Council misrepresented its grant schemes.

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Investigator's decision on behalf of the Ombudsman