The Ombudsman's final decision
Summary: Mr X complained, on behalf of company A, about the way the Council applied relevant guidance when deciding the company was not eligible for expanded retail discount. The refusal added to the financial difficulties the company suffered as a result of the COVID-19 pandemic. The Council was at fault for a delay in sending a written decision with reasons, for which it will apologise. It was also at fault for a long delay in responding to the complaint, for which it has already apologised.
The complaint
Mr X, a lawyer, complained on behalf of company A, that the Council had wrongly applied Government guidance when refusing the company’s request for expanded retail discount in 2020-21. Mr X also complained about a long delay in responding to his complaint.
Mr X says the failure to award extended retail discount added to the financial difficulties the company suffered as a result of the COVID-19 pandemic.
The Ombudsman’s role and powers
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) We consider whether there was fault in the way an organisation made its decision. If there was no fault in the decision making, we cannot question the outcome. (Local Government Act 1974, section 34(3), as amended) 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”.
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)
How I considered this complaint
I considered: the information provided by Mr X and the Council; and relevant Government guidance, as set out below.
Mr X and the Council had an opportunity to comment on my draft decision, and I considered comments received before making a final decision.
What I found
Background and relevant guidance In response to the COVID-19 pandemic the Government introduced two grant schemes to support businesses. The Department for Business, Energy and Industrial Strategy published guidance for councils on how to apply these: “Grant Funding Schemes” (March 2020).
Businesses which, on 11 March 2020, received the Expanded Retail Discount may be eligible for a grant between £10,000 and £25,000 from the Retail, Hospitality and Leisure Grant scheme.
Expanded Retail Discount (ERD) The Government extended business rates relief to retail, hospitality and leisure sectors under the Expanded Retail Discount (ERD) and increased the discount available to 100%. It published Guidance for councils; “Business Rates, Expanded Retail Discount 2020/21: Coronavirus Response Local Authority Guidance” (April 2020). This says each council will adopt its own scheme and decide whether to grant ERD, having regard to the guidance.
The guidance said eligibility would be based on the use of the premises rather than on occupation. Properties were eligible if they were wholly or mainly used: As shops, restaurants, cafes, drinking establishments, cinemas and live music venues; For assembly or leisure; or As hotel, guest and boarding premises and self-catering accommodation.
The guidance provided lists of the types of premises that would be eligible. The list for premises used for the provision of services to visiting members of the public included hire shops.
The guidance said the lists set out were not intended to be exhaustive and it recognised there would be premises with a mixed use. It said councils should “determine for themselves whether particular properties not listed are broadly similar in nature” to those listed.
At paragraph 16 it set out some types of premises that were not eligible, including premises that are not reasonably accessible to visiting members of the public.
Discretionary grant scheme The Government also provided funding for discretionary grants. It asked councils to set up their own schemes, having regard to guidance on the types of business they should prioritise. Essentially, this was to provide grants to businesses that were significantly affected by restrictions to prevent the spread of COVID-19 but were not eligible for the two grant schemes mentioned at paragraph 9 above.
What happened Company A operated an event hire business. It asked the Council to apply the expanded retail discount (ERD) to reduce its business rates liability and also applied for a Retail, Hospitality and Leisure (RHL) grant.
The Council told company A it was not eligible for ERD in April 2020. It did not provide reasons and did not confirm its decision in writing.
Since company A did not qualify for ERD, it was not eligible for the RHL grant. It applied for a discretionary grant and was awarded £25,000, which was equivalent to the maximum grant it would have got under the RHL grant scheme.
In November 2020, company A asked for written confirmation of the reasons it was not eligible for ERD. It referred to a telephone conversation earlier that month in which a Council officer had promised to confirm the decision in writing.
Since the Council did not respond, company A referred the matter to the local MP, who wrote to the Council asking for an explanation. In that correspondence company A explained the business was similar to a hire shop in that equipment would be provided with staff to operate it. It also said some clients visited the premises to discuss their event requirements.
Also in November 2020, company A applied for a grant from the new Local Restrictions Support Grant (LRSG) scheme. On the application form it said its business was in the hospitality and leisure supply chain.
In late November, the Council responded to the MP, and in early December, it sent a copy of its response to company A. It said: The criteria for ERD stated the premises must be “wholly or mainly used for the provision of services to visiting members of the public”; It did not believe the premises were mainly open to visiting members of the public in the way a hire shop would be, although it acknowledged some clients would visit the premises; and It had awarded the company £25k from its discretionary scheme, which was specifically for businesses that did not qualify for the main grant schemes.
Mr X challenged the Council’s decision on 11 March 2021. He said: The guidance required the premises to be wholly or mainly used for one of the types of use listed, and company A’s premises satisfied that criteria; The requirement for the premises to be wholly or mainly used for the provision of services to visiting members of the public was separate and distinct, but in any case clients visiting the premises, whether announced or unannounced, were visiting members of the public; The guidance envisaged some premises would be mixed use and the Council could award ERD where the use was broadly similar to those listed, which he argued company A’s use was; and The Chancellor had in the House of Commons on 18 March 2020 said, when asked if event hire companies would be included in the RHL grant scheme: “what I would say is that those who have business premises will be eligible both for the relief and the grant, which will cover a significant number of event hire companies, which have premises”. Mr X argued this meant company A was automatically entitled to ERD.
The Council responded on 25 March 2021. It said: It had reviewed its decision and decided the original refusal of ERD was correct; Whilst the venues company A supplied would fit the criteria for ERD, company A did not because it was primarily an office. It did not meet the criteria in that the premises were not wholly or mainly being used to provide sport, leisure and facilities to visiting members of the public; and The Chancellor’s comments were made on 18 March and the guidance was issued on 2 April 2020. If event hire companies were intended to be covered by the guidance in line with the Chancellor’s comments, the guidance would have reflected this.
Mr X was unhappy with the response. He said the Council had simply repeated what it had said in December 2020 and had not addressed his point that the requirement to provide services to visiting members of the public was separate from the use types listed. He asked the Council to consider the complaint at stage 2 of its process.
The Council did not respond. Mr X sent a chaser email in mid-August. The Council acknowledged that email in mid-September and said it would be passed to “the appropriate manager” for a response. Mr X sent a further chaser in late November.
The Council responded to the complaint at stage 2 on 14 February 2022. It apologised for the delay in responding. It said: It accepted the Council had some flexibility in considering whether the premises were broadly similar to those listed in the guidance, but its view was the property in question was not broadly similar; It did not consider the Chancellor’s comments were as unequivocal as Mr X suggested; and It was satisfied the property was correctly identified as ineligible for the ERD.
Mr X remained unhappy and complained to us.
In response to my draft decision, the Council said: It was in regular dialogue with company A until July 2020, and company A was aware of the reasons it did not qualify for ERD. However, it has not been able to provide records to confirm this.
Its officer’s recollection was that there was no further communication on the matter between July 2020 and the MP contact in November 2020.
It has no record company A requested a written response prior to the MP contact.
It did not have sufficient resources to issue written responses to all enquiries about business grants, given the significant administrative burden of delivering the grant scheme and the exceptional circumstances of the time.
My findings
We are not an appeal body. Our role is to consider whether there was fault in the way the Council made its decision. I have considered the decision-making process. Unless there was fault in the decision-making process, I cannot comment on the decision reached.
I note the Council’s refusal to award ERD meant company A was not eligible for a grant from the RHL scheme. However, it paid company A an equivalent sum from its discretionary scheme so company A did not miss out on grant support. That said, if it had awarded ERD company A would have paid less in business rates, which is potentially a sufficient injustice to warrant further investigation.
The Council appears to have decided company A was not eligible for ERD in late April 2020. I have seen references to telephone conversations in April and May 2020 but no evidence the Council confirmed its decision in writing or gave reasons for it until it responded to the MP in late November 2020. Whilst I accept the Council was under extreme pressure as a result of the COVID-19 pandemic, the refusal to grant ERD had implications beyond company A’s eligibility for the RHL grant and therefore I consider it should have confirmed its reasons for refusing in writing, even if this was only by means of a short email. The failure to do so was fault. This led to uncertainty about why the Council had decided company A was not eligible until the Council’s response to the M.P, for which it should apologise.
In November 2020, the Council set out its reasons with reference to the evidence provided by company A. It said company A’s premises were not wholly or mainly used to provide services to visiting members of the public. Company A had said clients did attend its premises on occasion to discuss their event hire needs. It did not provide any information or evidence to show how often clients did so. It did provide photographs of the premises, which I have seen, and which show office spaces and meeting rooms.
Following the decision, neither company A nor Mr X provided evidence to show the premises were wholly or mainly used to provide services to visiting members of the public. Rather Mr X’s argument was that this requirement was distinct and separate from the property type. It would be for the court to decide the correct way to interpret the guidance.
Company A also argued the use of the premises was similar to a business type listed as eligible and used the example of a tool hire business. The Council explained why it was not persuaded the use of company A’s premises was similar to a tool hire business.
The guidance gave councils broad discretion to decide whether an applicant was eligible for ERD. I have found no fault in the way the Council considered the information company A provided and am satisfied it had regard to the relevant guidance when making its decision.
Complaints handling Mr X complained in March 2021 and the Council responded. It reviewed the ERD decision and explained why it considered the original decision was correct. Although I note Mr X was unhappy with the response, I do not consider there was fault at this stage.
Mr X asked the Council to consider the complaint at stage 2 and, specifically to address the point about how the guidance should be interpreted and the Chancellor’s comments in the House of Commons. Mr X chased the Council for a response in August and November 2021. The Council did not respond until February 2022. The long delay in responding was fault, for which the Council has already apologised. Whilst I understand Mr X remains unhappy with the Council’s response and, in particular, the way it has interpreted the guidance, I am satisfied it has explained its reasons for reaching its decision.
Agreed action
The Council will, within one month of the date of the final decision: apologise to company A for its failure to issue a written decision with its reasons for deciding the company was not eligible for expanded retail discount until November 2020; and remind relevant staff of the importance of confirming decisions in writing and providing reasons for refusals.
Final decision
I have completed my investigation. I found fault leading to injustice. The Council has agreed action to address that injustice and prevent recurrence of the fault.
Investigator's decision on behalf of the Ombudsman