Budget Decision-Making

March 19th, 2019 by James Goudie KC

R (Hollow) v Surrey County Council (2019) EWHC 618 (Admin) is now the leading case on challenges to local authority budgets. The challenge failed on all grounds. It was particularly focussed on savings in relation to special educational needs and disabilities (“SSEND”).

The Cabinet decision challenged was to approve the Council’s detailed service revenue and capital budgets for the 2018-19 financial year, including the Council’s budget for schools and within it for SSEND. The decision to make significant reductions in the funding available for SSEND under the Council’s Medium Term Financial Plan was alleged to be flawed.

The specific grounds of challenge were lack of consultation, breach of the Public Sector Equality Duty, breach of Section 11 of the Children Act 2004 (“the 2004 Act”) (safeguarding children and promoting their welfare), breach of Section 27 of the Children and Families Act 2014 (“the 2014 Act”) (keeping special education provision under review), failure to have regard to relevant considerations, and breach of the Tameside duty.

The Divisional Court (Sharp LJ and McGowan J) said, at paragraph 9, that the substance of the challenge was “centrally concerned” with the issues of (statutory and common law) consultation; and whether setting a budget without knowing “precisely how” those savings would be made or what the “implications and likely impact” of making tem might be, was “irrational”.

No consultation took place. That was lawful and permissible as a matter of local government finance and accounting practice as to what is included in a budget. That was not a decision to approve savings. The duty to consult would arise when identifiable cuts to services and spending on them were proposed.

Nor was there irrationality. The budget was a lawful part of a process. It identified the potential for future savings and how savings might be made, but the budget was not set in stone. What the Council’s budget decision had done was to identify areas of spending upon which it proposed to concentrate as the potential areas in which savings could be made. In those circumstances, the Council could not know what the impact of cuts might be in those areas (or consult on them) because, “at the time the decision was taken”, no cuts had been “decided upon” or “worked out”.

The Court said, at paragraph 68, that there was “nothing wrong as a matter of principle” with the Council’s budgetary approach. On the contrary, it was a “sensible and lawful way” for the Council to plan and manage its finances. That conclusion “unravelled” the claimants’ case, which, in truth, depended upon the erroneous proposition that the Cabinet could not lawfully make the decision under challenge absent worked-out proposals on how the savings might be made, or what the impact of such proposals might be.

The Court, at paragraphs 78 and 106, disapproved of R (KE) v Bristol City Council (2018) EWHC 2103 (Admin), on whether there was a common law duty to consult, or duty to consult pursuant to Section 27 of the 2014 Act.

The Court ruled, at paragraphs 81 and 85/86, that, having regard to the stage that the decision-making process had reached, there was, on the facts, sufficient compliance with the PSED, and with Section 11 of the 2004 Act, and, at paragraph 83, that there was no duty of consultation inherent in the PSED.

The Court, at paragraphs 87-107 inclusive, addressed in detail the case sought to be made by reference to Section 27 of the 2014 Act.

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