The Ombudsman's final decision
Summary: Mr X complained the Council wrongly decided to recover a business grant paid to him, placing his business at risk and causing him stress. We found fault in the Council’s decision making causing Mr X uncertainty. We were satisfied with the actions taken by the Council to review its decision and prevent recurrence. We recommended the Council provide Mr X with an apology and payment for uncertainty.
The complaint
Mr X complains the Council wrongly decided to recover a business grant paid to him. He says this placed his business at financial risk and caused him worry and stress.
Mr X also complains the Council failed to update its records regarding another business he owns and incorrectly offered him a grant for that business.
What I have investigated I have investigated the complaint at paragraph 1. At the end of this decision I have explained why I have not investigated another matter.
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 provide a free service, but must use public money carefully. We do not start or may decide not to continue with an investigation if we decide: there is not enough evidence of fault to justify investigating, or any fault has not caused injustice to the person who complained, or any injustice is not significant enough to justify our involvement. (Local Government Act 1974, section 24A(6)) 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 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
I spoke to Mr X and I reviewed documents provided by Mr X and the Council.
I gave Mr X and the Council an opportunity to comment on my draft decision. I considered any comments before making a final decision.
What I found
Liability for business rates The Local Government Finance Act 1988 (LGFA 1988) identifies three categories of ratepayer: occupiers owners, and persons named in central rating lists.
Case law says the four conditions of rateable occupation are: actual occupational possession exclusive occupation or possession occupation or possession which is of some value or benefit to the occupier/possessor occupation or possession which has a sufficient quality of permanence.
The case law on rates liability is highly technical. It is for a council to decide who is the correct liable ratepayer. However, the Ombudsman can consider if a council has followed a proper decision making process 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. Eligibility for SBRR is subject to s43 of the Local Government Finance Act 1988. This says the rate applies to occupied businesses.
Funding was payable to the person who the council recorded as ratepayer on 11 March 2020. However, where the council had reason to believe the information they held about the ratepayer on 11 March was inaccurate they could withhold or recover the grant and take reasonable steps to identify the correct ratepayer. Councils were to make clear to recipients that the grant was for the ratepayer and may be liable for recovery if the recipient was not the ratepayer on the eligible day.
The government would not accept deliberate manipulation and fraud. Any business caught falsifying their records to gain additional grant money would face prosecution and any funding issued would be subject to claw back, as may any grants paid in error.
Council recovery process The Council has provided an undated document which outlines how it will exercise its discretion on recovering any grants paid to the incorrect person. The documents explains the Council introduced this policy following earlier complaints to the Ombudsman, whereby it was clarified a council should not have a blanket policy of recovering grants but should consider exercising its discretion. The Council has confirmed this policy was not yet in place at the time of deciding to recover Mr X’s grant.
Principles of good administrative practice 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 The Council recorded Mr X as ratepayer at Address A on 11 March 2020.
The Council invited Mr X to apply for a business grant and on 1 April Mr X sent the Council his bank details for payment.
On 25 March and 16 April the Council received evidence to show a third party leased and paid rent at Address A. It also received information that Mr X had stopped trading from Address A from 1 January 2020.
On 22 April the Council paid Mr X a small business grant.
The Council has provided records which show on 25 June it began the process to seek return of the grant as Mr X was not entitled to it, with reference to the information received on 25 March and 16 April.
On 10 July the Council contacted Mr X by phone. Its records show Mr X explained he continued to trade from Address A but paid rent to the leaseholder as a sub-tenant. The Council discussed this internally and decided he needed to return the grant. On the same date Mr X spoke to the Council again. The Council’s records show it told Mr X he was not entitled to the grant because he was not the main tenant. Mr X asked the Council to invoice him as he had already spent the funds.
The Council has provided a document titled “corporate investigation referral” dated 7 August. This says: It paid Mr X a grant but then received information that a third party rented the property.
It spoke to Mr X who confirmed he had signed over the lease to a third party, however said he used a few sheds on the site and so thought he remained entitled to the grant.
Mr X had already spent the grant money and so no longer had funds to return this.
The Council told Mr X it would raise an invoice for him to repay the grant.
On 20 August the Council sent an invoice to Mr X in the sum of £10,000.
In September Mr X contacted the Council. He said he continued to trade from Address A and paid rent to the third party leaseholder. He was the recorded ratepayer at the time and believed the third party had only sought to change this to get the grant themselves.
The Council told Mr X the owners told it another party occupied the property from 1 January 2020. However, Government guidance said he had to be in occupation on 11 March to get the grant. Therefore, he had to repay the grant. It told him to contact the Ombudsman if he remained unhappy. The Council’s response did not comment on Mr X’s assertion that he occupied the property on 11 March.
In October 2020 Mr X disputed the Council’s decision. He said there were no new occupants from 1 January 2020. He continued to occupy the property but now paid rent to a third party leaseholder.
In July 2021 Mr X chased the Council for a response. The Council confirmed its decision remained the same and he could contact the Ombudsman. The Council did not address Mr X’s comment that he was in occupation at all times.
Mr X complained to the Ombudsman that the Council ignored evidence that showed he was entitled to a grant. Further that it should take into account that he did not make a fraudulent claim in respect of another property, despite having opportunity to do so.
In response to enquiries the Council explained: It took into account Mr X’s assertion that he occupied part of the premises and paid rent to the leaseholder, although this contradicted information provided by a third party.
Based on what Mr X had said, he did not meet the test for rateable occupation as he was not in exclusive occupation but shared the premises with a third party who was entitled to possession. This would have been the case on and before 11 March 2020 although it was unaware at that time.
It did not have a policy for exercising discretion on recovery at the time, but has enclosed its current policy.
It has now considered whether to recover the grant and detailed its reasons why it considers it reasonable to do so.
In comments on a draft decision the Council said Mr X failed to tell the Council of his change in circumstances. If he had explained the situation at the appropriate time this would never have occurred.
Findings
The Council awarded Mr X a grant as he was the ratepayer on 11 March 2020 and in receipt of SBRR.
While the Council had received information suggesting its record of the ratepayer may be inaccurate it had not yet taken this into account at the time of paying the grant to Mr X. Given the Council was under pressure to pay grants quickly and as it received information just days before processing the payment, I do not consider there was undue delay or fault by the Council.
The Council took steps to identify the correct ratepayer in line with Government guidance.
I am satisfied the Council considered relevant information, evidence and law in deciding Mr X was not the liable ratepayer. The Council was entitled to reach this decision. However, it should also have given Mr X clear reasons for its decision. I acknowledge the Council’s records show it gave some information to Mr X by phone in July 2020. However, Mr X challenged the Council’s decision in September and again in October. However, the Council failed to offer any further explanation or address his concerns. It also delayed responding until Mr X chased in July 2021. This is fault that caused Mr X avoidable uncertainty and resulted in his pursuing a complaint with the Ombudsman.
Government guidance published in March 2020 made clear councils had discretion whether to recover grants paid in error. However, the Council decided to recover the grant without taking this into account. This is fault. I note the Council put recovery action on hold pending the outcome of this investigation and therefore I consider this fault did not cause Mr X significant injustice.
The Council has since considered using its discretion. It has detailed its consideration showing it has taken account of relevant information and its recovery policy. It is not part of the Council’s policy to take into account Mr X’s conduct in respect of any other rates account. I note the Council has decided to recover the grant from Mr X. I cannot question the merits of this decision where the Council has followed a proper decision making process. I find no fault in the Council’s decision making.
Agreed action
To remedy the fault identified above I recommend the Council carry out the following actions within one month of the date of my decision: Provide Mr X with an apology; Pay Mr X £100 for uncertainty or reduce Mr X’s debt by this same amount, at the Council’s preference.
The Council has accepted my recommendations.
Final decision
I find fault in the Council’s decision making causing Mr X uncertainty. The Council has accepted my recommendations and I have completed my investigation.
Parts of the complaint that I did not investigate I did not investigate Mr X’s complaint that the Council offered a grant to his other business in error. This is because it is unlikely I would find fault by the Council, given it would be unaware of a change in ratepayer unless told. And because any fault did not cause Mr X significant injustice given he did not accept the grant and did not pay any rates at that address.
Investigator's decision on behalf of the Ombudsman