The Ombudsman's final decision
Summary: There was no fault in the Council’s decision it wrongly paid COVID-19 business support grants to the complainant’s business, nor that it should now seek recovery. There is also no evidence the Council told the complainant it had awarded his business the expanded retail discount. We have therefore completed our investigation.
The complaint
I will refer to the complainant as Dr W.
Dr W complains the Council has decided it wrongly paid COVID-19 support grants to his business and is now seeking to recover the money. He also complains the Council is now seeking to recover several years’ worth of unpaid business rates from his business, when he believed it was eligible for the expanded retail discount.
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 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) 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 reviewed Dr W’s correspondence with the Council.
I also shared a draft copy of this decision with each party for their comments.
What I found
Dr W owns a business which lets out treatment rooms to practitioners in a property in the Council’s area.
In November 2020, Dr W applied to the Council for a COVID-19 business support grant, which it paid. In doing so, it made the business eligible for a series of subsequent grants. In total the Council gave the business just over £15,000 in grant money.
However, the Council later became concerned the business did not qualify for these grants, on the basis it primarily offered ‘health’ treatments – such as osteopathy and acupuncture, which were excluded from the grant eligibility criteria – instead of ‘spa’ treatments, which were included.
The Council exchanged a series of correspondence with Dr W seeking further evidence of the type of treatments being offered by the business, but explained it was not satisfied with his responses. It also noted, in particular, Dr W had said the spa treatments the business had offered had ended at the beginning of the pandemic, and could not therefore have supported a grant application at the point the business had made it.
Dr W had also complained the Council was now seeking unpaid business rates, when he had been led to believe the business had been granted the expanded retail discount (ERD). The Council explained it had not awarded the business the ERD, again because it did not fall into the eligibility category due to the type of treatments it offered.
Legislative background COVID-19 business support grants Beginning in March 2020, the Government created schemes for councils to pay grants to small businesses and retail, hospitality and leisure businesses. This was because the COVID-19 restrictions affected so many of them.
The Government later introduced the Local Restrictions Support Grant to help businesses required to close from November 2020 due to COVID-19. Eligible businesses were those mandated to close by the Government and included non-essential retail, leisure, personal care, sports facilities, and hospitality businesses.
Expanded retail discount In March 2020, the Government announced that all retail businesses would receive 100% relief from business rates for the tax year 2020/21. In April, it then published guidance for councils on how to apply this relief.
At paragraph 10-12, the guidance said: Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used [as]: Hair and beauty services (such as: hairdressers, nail bars, beauty salons, tanning shops, etc) … Wellness centres, spas, massage parlours At paragraph 16 the guidance gave examples of businesses which should not qualify for the ERD. This included: Medical services (e.g. vets, dentists, doctors, osteopaths, chiropractors) The Government implemented a similar scheme for the tax years 2021/22 and 2022/23, with the same qualifying criteria.
Debt recovery In January 2021 the Government issued guidance on the recovery of wrongly paid COVID-19 support grants. This guidance has since been updated several times.
At paragraph 12, the guidance says: When Local Authorities identify that an award of grant was non-compliant (for example where the business receiving the grant did not satisfy the scheme eligibility criteria) they must determine whether it was intentional on the part of the business or a misunderstanding or misinterpretation of guidance … A Local Authority must instigate recovery on all grants judged to be non-compliant, and reasonable and practicable steps … must be followed by a Local Authority to attempt to recover a non-compliant grant.
The guidance also explains that a ‘non-compliant grant’ is one which the relevant business applied for in good faith, but the council later identifies it was not eligible for.
Analysis The Ombudsman’s role is to review how councils have made their decisions. We may criticise a council if, for example, it has not followed an appropriate procedure, not taken account of relevant information, or failed to properly explain a decision it has made. We call this ‘fault’ and, where we find it, we can consider what difference it may have made to the outcome and ask the council to address this.
However, we do not provide a right of appeal against council decisions, nor do we make operational or policy decisions on councils’ behalf. Where a council has made a decision without fault, we cannot criticise it, no matter how strongly a complainant may feel it is wrong. We do not uphold complaints simply because someone disagrees with what a council has done.
In this case, Dr W complains the Council has wrongly reversed its decision to pay his business a series of COVID-19 support grants. He considers the business offered spa-type treatments, bringing it under the grant eligibility criteria.
However, the Council has explained clearly why it is not satisfied this is the case. It highlights that it has seen no positive evidence the property was mainly used for spa-type treatments, and that the evidence it has seen all points towards its use for health-type treatments instead. This includes, for example, the name of the business – which refers to it as a ‘medical centre’ – and that Dr W’s website says he offers a variety of medical treatments to clients.
The Council has also pointed out that, by Dr W’s own statement, the business stopped offering spa-type treatments at the beginning of the pandemic, which would mean it could not have qualified to receive the grants anyway.
I acknowledge Dr W has responded to the Council’s points, in particular explaining that his own practice is separate from the business’s and that the business had its own website, which I understand is now defunct. But it is for the Council to weigh this evidence and make a decision whether it supports Dr W’s application. I am satisfied it has done so properly and so I have no grounds to criticise it. There is, therefore, no evidence of fault in the Council’s decision the business was not eligible for the grants it received.
It could be argued the Council was at fault for paying the grants to the business in the first place. There is no suggestion Dr W applied for the first grant fraudulently or in bad faith, and the Council has accepted it was its own error that it approved the application – which also meant it automatically paid the subsequent grants to the business in error as well.
However, we are conscious councils were, at the time, under significant pressure from Government to distribute grant funding quickly, and without the level of pre-approval scrutiny which might otherwise be expected. That, it appears, is what happened here. While it would be clearly be better if the Council had not paid the grants to Dr W’s business in the first place, under the circumstances I am not persuaded this justifies a finding of fault here.
Turning to the question of recovery, I note Dr W says the business will struggle to repay the grant money, and the Ombudsman has previously taken the view councils should consider whether it is appropriate to recover in such cases. In this respect, the original guidance issued by the Government at the start of the COVID-19 pandemic drew a clear distinction between grants paid wrongly because of deliberate manipulation and/or fraud by the payee, and those paid wrongly but in good faith. In the latter case, the guidance said the councils could seek to recover the money, but not that they must.
But this guidance has since been superseded by that published originally in January 2021, which tells councils they must take “reasonable and practicable” steps to recover wrongly paid grants in all circumstances, including those paid in good faith. The guidance also says that councils which fail to do so may be held liable by the Government for the debt, and be required to repay the money out of their own funds.
This being the case, and although I understand it has not started the recovery process yet, I am not persuaded there is any fault in the Council’s decision to do so here.
Dr W also complains the Council is now seeking to recover unpaid business rates from the business, despite his belief the business was awarded the ERD for the 2020/21 and 2021/22 tax years. He questions why the Council has only now started to seek recovery of the unpaid rates.
The Council directly refutes this, saying at no point did it inform Dr W the business would receive the ERD. It has explained there was a series of correspondence between Dr W and the Council in 2020, wherein the Council sought information to determine whether the business might qualify for the discount; but its conclusion was that it did not, for broadly the same reasons it now considers the business was not eligible for the grants it received. The Council wrote to Dr W in August 2020 to confirm this and has provided me with a copy of this email.
The Council has acknowledged the significant delay in beginning the recovery process. However, it explains this was because it needed to redeploy staff to administer business support grants during the pandemic, which created a large backlog of recovery work. Despite this, the Council says it sent Dr W the normal series of business rates bills and reminders for 2020/21 and 2021/22.
Although I acknowledge Dr W may have held an honest belief the Council had awarded the business the ERD, there is nothing here to suggest the Council told or misled him about it. Rather, the evidence shows it made clear it had not awarded the discount. And, while it is not ideal the Council has been unable to start the recovery process until more recently, this does not affect the business’s liability to pay. Again, I see no evidence of fault here.
I will add, in closing, that, although I have found no fault in the Council’s decision to recover the wrongly paid grants here, the Government guidance recommends councils offer to arrange a repayment plan to allow affected businesses “to pay back in instalments if required”. We would therefore expect the Council to consider whether this is appropriate in Dr W’s case as part of the recovery process.
Final decision
I have completed my investigation with a finding of no fault.
Investigator's decision on behalf of the Ombudsman