Summary: Ms X complained the Council wrongly refused her business an Additional Restrictions Grant resulting in her missing out. We found fault in the Council’s decision making. We recommended it provide Ms X with an apology and payment for uncertainty, review its decision and act to prevent recurrence.

The complaint

1. Ms X complains the Council refused her business an Additional Restrictions Grant, contrary to Government guidance, causing her to lose out on funds.

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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 reviewed documents provided by Ms X and the Council.
7. I gave Ms X and the Council an opportunity to comment on my draft decision. I considered any comments before making a final decision.

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What I found

Additional Restrictions Grant (“ARG”)

8. In October 2020 the Government introduced the ARG to support businesses impacted by the COVID-19 pandemic. It issued guidance to councils.
9. The Government encouraged councils to support certain business sectors but made clear they could issue grants at their discretion, based on local economic needs.
10. The Government also suggested factors for councils to consider when deciding the level of the grant.
11. All businesses that were trading and met other eligibility criteria could apply to receive funding. Businesses in administration, insolvent or subject to a striking-off notice, were ineligible.
12. The guidance said a business is trading if it is engaged in business activity. This meant carrying on a trade or profession, or buying and selling goods or services to generate turnover. Fully constituted businesses in liquidation, dissolved, struck off or subject to a striking-off notice were not eligible under these conditions.
13. To help further, it gave these trading indicators:
• The business has staff on furlough
• The business continues to trade online, via click and collect services etc.
• The business is not in liquidation, dissolved, struck off or subject to a striking-off notice or under notice
• The business is engaged in business activity; managing accounts, preparing for reopening, planning and implementing COVID-safe measures
14. This list of indicators was not exhaustive and councils were to use their discretion to decide if a business was trading.
15. The Government made their digital due-diligence tool, Spotlight, available to councils to support the administration of grants. Councils had to use either Spotlight (or an equivalent tool) or enhanced checks to support pre-award due diligence.
16. Spotlight complemented existing pre-award due-diligence checks and highlighted areas of risk to inform grant-making decisions, through fundamental (basic) due diligence checks. In particular, Spotlight could quickly and easily flag where organisations had recently become inactive to support councils to review the ongoing viability of recipients prior to making awards.

The Council’s ARG policy

17. The Council has provided a copy of its December 2020 report to Cabinet on its proposed ARG scheme.
18. This said an application must meet all the following criteria:
• The business is solely or mainly based in Westminster
• The business has experienced a significant fall in their business income
• The business falls within one or more of the named categories in the report
• The business has taken steps to reduce its costs as far as practically possible
• The business is currently operational / trading at the property
• The business has provided the requisite data required by the government for grant applications

Principles of good administrative practice

19. In 2018 the Ombudsman published a guidance document setting out the standards we expect from bodies in jurisdiction “Principles of Good Administrative Practice”. We issued an addendum in response to the COVID-19 pandemic; “Good Administrative Practice during the response to Covid-19”. This shows we expected similar standards from councils, even during crisis working. Good practice includes:
• Taking reasonable, timely decisions, based on all relevant considerations
• Understanding the individual circumstances of a case – not falling back on ‘blanket policies’
• Being open and clear about policies and procedures and ensuring information, and any advice provided, is clear, accurate and complete
• Stating the criteria for decision making and giving reasons for decisions
• Explaining clearly the rationale for decisions and recording them

What happened

20. On 22 April 2021 Ms X applied for an ARG. She explained her business could not operate since the pandemic hit and loans were its only income.
21. The Council carried out a Spotlight check. This flagged two areas of concern; overdue accounts and number of directors.
22. The Council issued its decision to Ms X on 1 June. It said, from researching her business as part of its audit and compliance procedures, it found her business was either in administration, had overdue accounts, insolvent, or subject to a striking off notice. Therefore, it could not approve her application. It was a requirement of the scheme that businesses were solvent, not in administration and not subject to striking off notices.
23. In July Ms X disputed the Council’s decision. She said the business was not in administration, insolvent or subject to a striking-off notice. That the accounts were overdue was not a valid reason to refuse the grant. Her auditor also emailed the Council to confirm the business was not in liquidation.
24. The Council replied that it refused the grant because the business had overdue accounts. It repeated it was a requirement of the scheme that businesses were solvent, not in administration and not subject to striking off notice.
25. The Council told the Ombudsman the discretionary powers relevant to the grant allowed it to strengthen its compliance procedures. More stringent compliance measures were necessary to ensure funding went to businesses not in administration, insolvent or subject to a striking-off notice. It assessed these criteria via a Spotlight check. Ms X’s business failed the Spotlight check.
26. The Council said overdue accounts were an indicator of an inactive company and also a preliminary phase for which a striking-off notice could be given. As a result, it used its discretion to exclude businesses with overdue accounts from ARG funding.
27. It accepted its initial outcome response may not have been as clear in its reasoning as it could have been. Though considered this did not impact upon the final decision.

Findings

28. The Council refused Ms X a grant without giving clear reasons for its decision. It repeatedly referred to Government guidance which in fact did not support its decision making.
29. To refuse the grant because of overdue accounts was not based on Government guidance or the Council’s policy, as recorded.
30. However, the Council appears to have had a blanket policy of excluding businesses with overdue accounts. While it could have used Spotlight to inform its decision making it appears to have used this to make its decisions. It has not taken any other factors into account, such as Ms X’s reasons for overdue accounts.
31. The Government said all businesses that were trading and met other criteria were eligible. Yet the Council has not shown it considered whether Ms X’s business was trading or not.
32. For the above reasons I find fault in the Council’s decision making process. This has caused Ms X uncertainty.

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Agreed action

33. To remedy the injustice set out above I recommend the Council carry out the following actions within one month:
• Provide Ms X with an apology;
• Pay Ms X £100 for distress and uncertainty;
• Review its decision on Ms X’s application, ensuring it does not rely on a blanket policy and, write to her with its decision and reasons, paying a sum equal to the grant if applicable; and
• Remind staff of the Ombudsman’s expectations to have clear reasons for decisions and not to fall back on blanket policies.
34. The Council has accepted my recommendations.

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Final decision

35. I find fault in the Council’s decision making on Ms X’s request for an ARG. The Council has accepted my recommendations and I have completed my investigation.

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Investigator's decision on behalf of the Ombudsman