Summary: Mr X complained the Council awarded his business a COVID-19 business grant but later notified him it had been paid in error and demanded repayment. The timing of the recovery decision meant Mr X lost the opportunity to apply for other grant funding which he may have been eligible for. A suitable remedy is agreed.

The complaint

1. Mr X complained the Council awarded his business a Local Restrictions Support Grant but subsequently notified him it had done this in error and demanded repayment.
2. Mr X says the timing of this decision meant he was not able to apply for the Additional Restrictions Grant and so missed out on alternative available financial help.

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The Ombudsman’s role and powers

3. 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)
4. If we are satisfied with an organisation’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#

5. 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 taken account of their comments in reaching my final decision.

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What I found

Local Restrictions Support Grants (LRSG)

6. During the COVID-19 pandemic the Government ordered some businesses to close and gave councils funding to support those businesses. It issued guidance for councils on how to allocate this funding.
7. LRSG (Closed) provided grants to businesses in the highest band of local restrictions from 8 September to 5 November 2020.
8. Eligible businesses were those that had been open as usual and providing in-person services to customers from their business premises but were then required to close by law for a consecutive period of no less than 14 days.
9. Excluded businesses included those:
• able to continue to trade because they did not depend on providing direct in-person services from premises and could operate their services effectively remotely or
• those who chose but were not required to close.
10. The Government imposed a new national lockdown starting on 5 November 2020 and issued an addendum to the guidance referred above. This superseded the guidance above and covered the period 5 November to 2 December 2020 when national restrictions forced businesses to close.
11. Eligible businesses were those ordered to close by Government. This included non-essential retail, leisure, personal care, sports facilities and hospitality businesses.

Additional Restrictions Grant Fund

12. On 31 October 2020 the government announced that national restrictions would be reintroduced. Enhanced business support settlements that had previously been provided to areas entering Tier 3 restrictions were extended and formalised into the Additional Restrictions Grant.
13. The ARG funding is a discretionary scheme that aims to support businesses severely impacted by coronavirus restrictions. All businesses that are trading and meet other eligibility criteria may apply to receive funding under this scheme. Government guidance said applications are required under this scheme for new applicants.

The Council’s Additional Restrictions Grant Scheme

14. The Council set out the eligibility criteria for this discretionary scheme. The ARG had three different phases each with their own eligibility criteria:

• Phase 1 was targeted at small and micro businesses that had not already received assistance from other government schemes and included busineses in shared offices or flexible work spaces, market traders, Bed and Breakfast businesses paying council tax and charity properties;
• Phase 2 was for other small businesses not covered by Phase 1 and who had not received other funds;
• Phase 3 was payable to businesses that had already received grants if they could demonstrate they had been severely impacted which it took to mean a business suffered a reduction in its yearly turnover during 2020 of more than 30%. The business would also need to demonstrate that its yearly ongoing fixed costs exceeded any amount already received in grant payments.

Restart grant

15. Support was provided to support specific types of business, including non essential retail businesses, to enable them to reopen safely after restrictions were lifted following the third national lockdown.
16. The Guidance set out the types of businesses that could be considered non-essential retail and specifically excluded some business types including taxi and vehicle hire businesses, and financial providers. However, those lists were not exhaustive and the Guidance said it was for councils to determine those cases where eligibility was unclear.

Key facts

17. Mr X runs a holiday lettings business which operates from a premises where he pays business rates. The Council wrote to Mr X on 16 November 2020 advising him about the LRSG scheme saying he could be eligible and inviting him to apply. The letter said that he should only apply if he is able to demonstrate the business has been forced to close due to the national lockdown legislation or that he is unable to provide his usual in person customer service from the premises. Mr X submitted an application.
18. The Council wrote to Mr X again on 26 November advising him the application had been successful and payment had been made to his nominated bank account. It also said that further verifications checks would be made and it would seek full recovery if is identified he was not eligible.
19. On 10 May 2021, the Council wrote to Mr X saying its records showed he had previously received a LRSG payment. It said the eligibility criteria was that his business was required to close in compliance with lockdown regulations applicable at that time. It said it had carried out some post payment assurance checked and it was not certain his business was required to closed from November onwards. It said it had placed a hold on the Restart Grant and asked him to contact the Council to discuss the nature of his business.
20. On 28 July the Council wrote to Mr X asking him to repay the £9,431 he had received as LRSG payments and the Closed Business Lockdown Payment.
21. Mr X made a formal complaint on 16 August. He said that he ran a short term holiday lets business and was mandated to close and stop the usual trading from the business premises. He said he had paid back the grants in order to avoid any fines but requested a review of the case.
22. The Council responded on 24 August 2021 saying the LRSG application form required applicants to check they met the eligibility criteria and confirm they had done so. The Council had provided a hyperlink to the relevant government guidance. The Council said point 53 of the guidance said funding was not provided if “you can continue to operate during the lockdown period because you do not depend on providing direct in-person services from your premises.” It said it appreciated Mr X had applied in good faith but it was the responsibility of the applicant to confirm they met the eligibility criteria.
23. Mr X requested the complaint progress to the next stage of the Council’s complaints procedure. The Council responded on 20 October saying the main reason his business is not eligible is because his business was not mandated to cease operating. It said the nature of his business meant that although he could not make bookings to guests to stay in the holiday lets during the lockdown, it could take future bookings. It noted the business operated from local premises but there was no evidence the substantive use is retail. It noted guests come to

24. the office to collect keys and some bookings may be made there but it felt that most bookings will be made on the phone or through the website. It said no evidence had been provided to suggest the main proportion of sales is generated on a face to face basis. It said the business does not depend on providing direct in-person services and it could continue to operate online.

Analysis

25. Mr X applied for and was awarded the LRSG. Mr X believed he was eligible because he had to close the premises he used to run his lettings business. The Council initially paid the grant but on review, over six months later, it decided it had made an error and sought to recover the grant.
26. While it is appreciated that councils were working under pressure and wanted to ensure the money was paid to businesses quickly, there was faut in this case as it paid a grant when the business was not eligible.
27. Once the Council decided the grant had been paid in error, it took action to recover it. I find no fault in this decision. Mr X requested a review of the decision and this was carried out. The Council explained the main reason was because it was not satisfied the majority of Mr X’s business was carried out face-to-face at the premises. The Council took the view the majority of trading would be done online. Mr X has not provided any evidence to show the Council’s position is wrong.
28. The Council was entitled to take the decision to recover the incorrectly paid grant. However, if the LRSG had not been paid then Mr X would have been entitled to apply for the Additional Restrictions Grant under Phase 3. However, Mr X was not able to apply because this scheme was not open for applications at the time the Council made the decision to recover the LRSG. The timing of the recovery of the LRSG prevented Mr X from applying for other grants which is a significant injustice.
29. It seems to me the Council’s fault in wrongly paying Mr X the LRSG has resulted in him missing the opportunity to apply for the ARG. I cannot say whether Mr X would have been eligible for the ARG but this uncertainty is an injustice that requires a remedy.

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Agreed action

30. To remedy the injustice caused to Mr X as a result of the Council’s fault it will, within one month of my final decision, take the following action:

• Write to Mr X setting out the criteria for the ARG and inviting him to submit an application and supporting evidence. It should then consider his application and if it finds he would have been eligible, should pay an amount equivalent to the grant that he would have received; and
• Pay Mr X £150 to recognise his uncertainty and time and trouble in pursuing this matter.

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Final decision

31. I have completed my investigation with a finding of fault for the reasons explained in this statement. The Council has agreed to implement the actions I have recommended. These appropriately remedy any injustice caused by fault.

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Investigator's decision on behalf of the Ombudsman