Summary: Mr X complained the Council was inappropriately seeking to recover a COVID-19 business grant paid to his business in April 2020. The Council paid the grant in error. This was fault for which it should apologise. It was not at fault for seeking to recover the grant.

The complaint

1. Mr X complained the Council confirmed his business was eligible for a COVID-19 business grant and paid the grant but is now inappropriately seeking to recover it. The recovery would have a negative financial impact on his business.

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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 Mr X provided;
• the information the Council provided in response to our enquiries, including discussing the complaint with a Council officer;
• relevant Government Guidance, as set out below; and
• our guidance on remedies, available on our website.
7. Mr X and the Council had an opportunity to comment on my draft decision and I considered their comments before making a final decision.

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What I found

Relevant Government Guidance

8. In response to the COVID-19 pandemic the Government introduced various grant schemes to support businesses, including the Small Business Grant (SBG) scheme, and Retail Hospitality and Leisure (RHL) Grant Scheme introduced in March 2020. The Department for Business, Energy and Industrial Strategy (BEIS) published guidance for councils: “Grant Funding Schemes” (March 2020), and later also published a Frequently Asked Questions document providing further guidance on administering the scheme.
9. RHL grants were available for businesses which, on 11 March 2020, were eligible for the Expanded Retail Discount (ERD). Councils were asked to use their discretionary powers to grant ERD, in line with Government Guidance. This said premises that were mainly or wholly used for certain RHL purposes would be eligible for ERD. This was specified to be a test on “use rather than occupation”. Premises that were not reasonably accessible to visiting members of the public were expressly excluded from receiving ERD.
10. The guidance said (at paragraph 38):

“The Government will not accept deliberate manipulation and fraud – and any business caught falsifying their records to gain additional grant money will face prosecution and any funding issued will be subject to claw back, as may any grants paid in error”.

11. The Frequently Asked Questions said (question 73):

If a payment subsequently turns out to have been made due to fraud or error, will you expect the council to meet the cost?

The Government will not accept deliberate manipulation and fraud – and any business caught falsifying their records to gain additional grant money will face prosecution and any funding issued will be subject to claw back, as may any grants paid in error. We will provide further guidance on payment assurance, including liabilities.

12. The Government issued guidance to councils on recovering grants paid in error or as a result of fraud in November 2020. This said where a grant was paid in error or where councils later identify the recipient was not eligible, councils should reclaim the grants. Councils were required to take all reasonable and practicable steps to reclaim incorrectly paid grant funds. This meant councils should:
• Raise an invoice to create a debt – this must clearly set out the reasons for recovery and a deadline for repayment;
• Send a reminder letter within 28 days of the deadline given in the invoice, if the invoice remained unpaid; and
• Send a final reminder letter within 28 days of the deadline given in the reminder letter, if the invoice was still unpaid.
13. The Guidance said councils may take additional steps such as calling or emailing the business or using civil recovery action. It also said councils should be flexible, including offering instalment plans, although grants of £25,000 should be paid within 2 years.

What happened

14. Mr X’s business is the landlord for a business premises that is listed on the ratings list as a restaurant and premises. The Council amended its records to show the business as the liable ratepayer in December 2019. At this stage the premises were recorded as being occupied and business rates were charged on that basis.
15. I have seen emails between Mr X and the Council between early January and late March 2020, in which Mr X argued the business should not be the liable ratepayer because the previous tenant had not returned the keys so the business could not access the premises. The Council said that, as the lease had ended, the business was the correct ratepayer for the premises. It amended its records on 21 April 2020 to show the premises were empty from September 2019.
16. Mr X applied for a Retail, Hospitality and Leisure (RHL) grant on 7 April 2020. On the application he said the business was the property owner and the premises were being used as a restaurant. The application included a Declaration, which said:
• I agree that I have read the relevant detail before applying. (The Declaration provided a link to relevant Government Guidance at the time); and
• I submit my application on the basis that I have read the guidance and believe that my business will qualify. I understand that if I have falsified records to gain additional grant or if I have provided false or misleading information, I will face prosecution and any funding will be repayable.
17. The Declaration said businesses were eligible for the RHL grant if they were in receipt of ERD and set out the amounts payable, depending on the rateable value of the premises. It also said businesses that were in liquidation or dissolved on 11 March 2020 were not eligible.
18. The Council paid the business a RHL grant of £25,000 on 22 April 2020.
19. In response to my enquiries, the Council explained that its business rates are handled by an external organisation on its behalf. The external organisation had provided the grants team with a list of businesses eligible for the initial grant schemes (the Small Business Grant Scheme and the Retail, Hospitality and Leisure Grant Scheme). Mr X’s premises were on that list, and he provided a Declaration. It said the grants team, which had no access to information on the business rates system, had no reason to question the application at the time.
20. The Council explained the premises were listed as eligible, despite the external organisation having evidence in March 2020 that the premises were empty, because the business rates record was not updated to reflect the true position until after the list was generated.
21. In September 2020, we asked the Council to provide documents relating to another grant application made by Mr X following a complaint to us. When considering that application, the Council identified the business premises subject to this application were empty on 11 March 2020. This meant the business was not eligible for ERD at the relevant time and therefore was not eligible for the RHL grant.
22. The Council decided to recover the grant because it was paid in error and because Mr X had provided a Declaration to confirm he understood the business was eligible and that the information he provided was correct. The Council considered the information provided was misleading because it implied the business was operating a hospitality business from the premises at the relevant time when, in fact, the premises were empty and had been empty for at least three months.
23. The Council issued an invoice on 1 October 2020 to recover the grant. The invoice stated: “subsequent information confirms the property to be empty at the time of the grant eligibility hence the original grant is repayable”. The invoice stated the grant should be paid “by return” and provide details of payment methods.
24. Mr X queried the invoice. He suggested it was sent in error since he had provided all the information the Council requested to support the grant application. The Council replied that as the premises were empty on the relevant date the business was not eligible for the grant and should repay it. Mr X disagreed. He made a formal complaint in December 2020.
25. The Council responded in early January 2021. It said that after paying the grant, additional information had been provided by its local taxation team to show the business was not operating on 11 March 2020, the relevant date for the scheme. Mr X had signed a Declaration to confirm the information he provided was correct and that Declaration permitted the Council to recover the grant if misleading information was provided. It said Mr X should contact its corporate debt team if he wished to discuss a repayment plan. It said he could complain to us if he was unhappy with the way it had dealt with his complaint.
26. Mr X remained unhappy with the Council’s response. In early May he told the Council he would complain to us but he did not do so until July 2021. The Council suspended recovery action when Mr X complained, and recovery remains suspended pending the outcome of our investigation.

My findings

27. We are not an appeal body and it is not my role to comment on the decisions the Council made. I have considered the decision-making process. Unless there was fault in that process, I cannot comment on the decisions made.
28. When considering the way the Council dealt with the original grant application, I am mindful of the difficulties it faced at the time. This was the start of the COVID-19 pandemic. The Government had announced a national lockdown, which meant Council staff were unexpectedly, and at short notice, asked to work from home. The Government had announced grant schemes to support affected businesses and asked councils to administer these and pay the grants to eligible businesses as quickly as possible. Councils had to deal with a substantial number of changes to their business rates records, as a result of businesses not previously registered for business rates, seeking to back-date registrations, and other businesses seeking changes to the record. In most cases, those changes had to be dealt with before a council could decide whether a business was eligible for a grant. In short, it was a very challenging time for councils.
29. In this case, the external organisation, acting on behalf of the Council, held information that showed the premises were empty. This meant the business was not eligible for ERD and therefore was not eligible for the RLH grant. As explained above, the external organisation included the premises that are the subject of this complaint, in a list for the Council of eligible businesses, despite having evidence the premises were, in fact, empty. The Council remains responsible for the acts and omissions of organisations acting on its behalf, and the payment of a grant in these circumstances was fault.
30. The Guidance issued in March 2020 stated that grants paid as a result of fraud or error may be recovered. The Government issued specific Guidance on Debt Recovery in November 2020, which was shortly after the Council decided to recover the grant in this case. However, it gives an indication of what the Government expected from councils, which was to take all reasonable and practical steps to recover grants paid in error.
31. The Council could have decided not to recover using its general discretion. In this case, Mr X provided a Declaration that the business was eligible for the grant when he was aware that it was not operating a RHL business from the premises on the relevant date and did not have access to the premises. The Council took those factors into account when deciding whether to recover the grant and it was entitled to do so.
32. I also note that when it identified the error, the Council did not delay in deciding whether to recover and asking Mr X to repay the grant. Further, it suspended recovery action whilst it dealt with Mr X’s complaint and whilst we investigated it. The Council acted appropriately after discovering the error and I have not found fault in its actions from September 2020 onwards.
33. I acknowledge Mr X did not expect to have to repay the grant and the Council’s decision to ask him to do so caused him stress and uncertainty. However, Mr X has had the benefit of the grant money since April 2020, and the Council has indicated it is willing to agree a repayment plan, which would allow the business to repay the grant over time. In the circumstances, I consider an apology is sufficient to remedy the injustice caused.

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Agreed action

34. The Council will, within one month of the date of the final decision, apologise to Mr X for paying his business a COVID-19 business grant in error, causing stress and uncertainty when it later decided to recover it.

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Final decision

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

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Investigator's decision on behalf of the Ombudsman