The Ombudsman's final decision
Summary: Mr X complained the Council refused his applications for COVID-19 grants without properly explaining the reasons for refusal, causing financial hardship. The Council did explain the reasons for refusal and so there is no fault on this point. There is fault by the Council in respect of consideration of round two applications for the discretionary scheme but this did not result in any significant injustice to Mr X.
The complaint
Mr X complained the Council refused his applications for COVID-19 grants without properly explaining the reasons for refusal.
Mr X says this has resulted in financial hardship for his business.
The Ombudsman’s role and powers
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) 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) 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)
How I considered this complaint
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 invited their comments.
What I found
Business grants 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 Small Business Rates Relief (SBRR) were eligible for a Small Business Grant of £10,000.
Businesses which, on 11 March 2020, would have received the Expanded Retail Discount, were eligible for a Retail, Hospitality and Leisure Grant (RHLG) of up to £25,000 Expanded Retail Discount In April 2020 MHCLG published “Business Rates, Expanded Retail Discount 2020/21: Coronavirus Response Local Authority Guidance”.
The Expanded Retail Discount (ERD) was available to premises wholly or mainly used for retail, hospitality or leisure.
The guidance listed the types of businesses that were eligible. However, it was for councils to decide if a business was broadly similar in nature to those listed and so eligible.
The guidance also listed the types of businesses not eligible. This included premises used for: Financial services e.g banks Medical services e.g dentists Professional services e.g solicitors Post office sorting offices and; Premises not reasonably accessible to visiting members of the public.
Discretionary Grant Scheme In May 2020, the Government introduced a discretionary grant scheme aimed at businesses ineligible for the earlier schemes. To support the introduction of this scheme the Government published guidance contained in: “Local Authorities Discretionary Grants Fund- guidance for local authorities”.
Under the scheme, councils could award a discretionary grant of £25,000, £10,000 or any sum under £10,000 to businesses which could not access other grant funding (other than the Job Retention Scheme). The Council had discretion over the amount of payment in each case.
The Government said as a guide, the following types of business should be a priority for funding: small businesses in shared offices or other flexible workspaces that did not have their own rating assessment; regular market traders with fixed building costs, such as rent, who do not have their own business rates assessment; bed and breakfasts which pay council tax instead of business rates; and charity properties in receipt of charitable business rates relief which would otherwise have been eligible for Small Business Rates Relief or Rural Rate Relief.
The guidance said councils should publish details of their discretionary grant scheme on their website. It said this should include clear guidance on which types of business they would prioritise and how they would decide on the level of grant.
The Council’s scheme The Council published its policy and eligibility criteria for the discretionary grant scheme. It explained there would be two application rounds. It said businesses would need to evidence high on-going fixed property costs and demonstrate a significant fall in income due to COVID-19. The policy stated that significant meant an income reduction of at least 40% month on month which would be evidenced by bank statements. It stated that businesses not trading on 11 March 2020 and companies in administration, insolvent or subject to a striking off notice would not be eligible.
Round One of the discretionary scheme gave priority in line with Government guidance. The Council also added its own local priorities which included hospitality businesses directly supporting events by way of catering services but specifically excluding food and beverage suppliers in round one.
Round Two of the discretionary grant scheme included three business types: Small businesses and charities in shared offices and other flexible workspaces; Charities with premises with rateable value of £15,000 to £51,000 not eligible for a retail, hospitality and leisure grant; Factories and workshops with rateable value of £15,000 to £51,000 that do not benefit from rates relief or a business grant.
Key facts Mr X has a wholesale food business serving the restaurant and catering sector. He says the lockdowns had a major impact on his business.
Mr X’s business rates were above the limit for the Small Business Grant, so he applied for the RHLG. To qualify for that grant a business had to be in receipt of the ERD. Mr X’s business is a wholesale supplier to other business and so he did not qualify for the ERD because his business was not considered to be reasonably accessible to visiting members of the public.
On 12 May 2020, Mr X emailed the Council saying his grant application for the RHLG had been previously rejected but he now understood the government was permitting local authorities to exercise discretion in some cases. The Council replied on 13 May saying it was waiting for further guidance from the Government on the new discretionary scheme and advised him to check the website on a regular basis.
Mr X contacted the Council again saying he urgently needed financial assistance. The Council replied saying the Discretionary Grant Scheme had only recently been announced by the Government and it was working hard to enable its systems to offer this scheme. It explained it was a huge task technically and advised him to continue to monitor its website.
Mr X emailed the Council on 8 June saying he was having problems submitting his online application for the Discretionary Grant. He said he could not complete the application without uploading supporting documents but the system said his files were not compatible.
On 9 July the Council wrote to Mr X explaining his business did not meet the eligibility criteria for the first round of the discretionary grant payments. It said a second round of the Discretionary Scheme would be announced soon and that it would review his application in line with the changes to the policy for that round. Mr X did not submit a further application for round two of the discretionary grant scheme.
Mr X then began corresponding with the Council mainly about the business rates charge and the recovery action taken by the Council. Mr X explained he had moved out of the property on a temporary basis at the end of May. The Council did not apply any void exemption as it had contact with Mr X in July 2020 about grants and considered he was still in occupation at that time. At some point Mr X moved back into the same premises after negotiating a rent reduction with the landlord.
Mr X made complaints to the Council about the lack of financial support given to his business and about the business rate charges even though he had vacated the premises for a period of time.
The Council explained that as the rateable value of his business premises is £22,250 he was not eligible for the Small Business Grant. It said his business did not qualify for the ERD or the related grants. It said that his application for the Discretionary Grant was refused because he did not meet the eligibility criteria.
In respect of the rates, it said the information he provided to the Council indicated he continued to trade through the summer of 2020 and that even if he had vacated for a temporary period, he would not be granted a void exemption. Mr X continued to pursue this issue with the Council and I note that the Council did adjust the business rate bill and exclude the period Mr X vacated the premises.
Analysis Mr X complains the Council refused his applications for COVID-19 grants without properly explaining the reasons for refusal. Mr X is complaining about the grants prior to moving out of the premises in June 2020.
I have a copy of the Council’s response to Mr X’s complaint from June 2021. In this letter, the Council does explain why it refused his application for the RHLG. Mr X’s business is not a shop open to the public but rather supplies food to the restaurant and catering industry. Because the business is not open to visiting members of the public, Mr X was not entitled to the ERD or the RHLG. There is nothing to suggest Mr X challenged this decision at the time. When I spoke to Mr X he confirmed the business was not open to the public and so there is nothing to suggest fault in the Council’s decision. I am also satisfied the Council did explain to Mr X the reasons for refusal.
After being refused the RHLG, Mr X sought information about the Discretionary Grant Scheme. Mr X attempted to make an application during round one of the application process. The Council explained that his business was not eligible in round one. The Council had provided Mr X links to the published criteria on its website. The published criteria clearly excluded food and drink suppliers in round one. I find no fault in respect of how the Council dealt with Mr X’s application for round one of the discretionary grant scheme or how it explained the reason for refusal.
The Council says Mr X did not apply for round two of the discretionary grant scheme and so no decision on his entitlement was made. However, I note that when writing to Mr X about the round one refusal, the Council’s response refers to round two. I consider the wording used by the Council indicates the current application would be considered as part of round two and that a further application would not be needed. There is nothing to suggest the Council ever considered Mr X’s entitlement to round two.
It is possible the wording used by the Council meant Mr X did not apply for round two of the discretionary grant scheme. While it is not the Ombudsman’s role to decide if a business would have been entitled to the grant, the further three categories of business included in the round two criteria do not include Mr X’s business. Therefore, on balance, I consider that even if Mr X had applied, he would not have been entitled to the discretionary grant. So while it was fault for the Council to indicate his application would be considered at round two and then not do this, I do not consider Mr X missed out as result.
Final decision
I will now complete my investigation as there is no evidence of fault causing a significant injustice in this case.
Investigator's decision on behalf of the Ombudsman