Were a decision and an impending decision by Barnet Council, to outsource a high proportion of its functions and services to private-sector organisations, lawful? That was the issue in R (Nash) v Barnet LBC, [2013] EWHC 1067 (Admin), a judicial review challenge brought by a local resident.  The challenge failed at a rolled-up hearing. There were three grounds of challenge: non-compliance with best value consultation obligations; breach of the PSED; and breach of fiduciary duty to council tax payers. A procurement challenge was not pursued.

The first question was whether the claim was in time.  The Claimant sought to rely on the House of Lords decision in R (Burkett) v Hammersmith & Fulham LBC [2002] 1 WLR 1593, where planning permission had been preceded by a resolution approving the award subject to certain conditions.  However, the Judge said, at para 41:

“… I do not believe that Burkett is authority for the proposition that in every situation in which a public-law decision is made at the end of a process which involves one or more previous decisions – what I will refer to as “staged decision-making” – time will run from the date of the latest decision, notwithstanding that a challenge on identical grounds could have been made to an earlier decision in the series. In my judgment it is necessary in such a case to analyse carefully the nature of the latest decision and its relationship to the earlier decision(s). I believe the true position to be as follows. If the earlier decision is no more than a preliminary, or provisional, foreshadowing of the later decision, Burkett does indeed apply so that the later, “final”, decision falls to be treated as a new decision, the grounds for challenging which “first arise” only when it is made. But if the earlier and later decisions are distinct, each addressing what are substantially different stages in a process, then it is necessary to decide which decision is in truth being challenged; if it is the earlier, then the making of the second decision does not set time running afresh. I accept that the distinction may in particular cases be subtle, but it is in my view nonetheless real and important.”

On that basis, the challenge on the basis of failure to consult was out of time. Nor was it appropriate to extend time.  The same applied to breach of fiduciary duty, and to the primary case on the PSED.  Permission therefore was largely refused, but the Judge went on to express his views on the substantive issues. 

As to the best value consultation duty, under Section 3 of the Local Government Act 1999, as amended by the Local Government and Public Involvement in Health Act 2007, the Judge said, at paras 74 and 75:

“74 …  It is hard to see why authorities should be entitled to fulfil their duty to consult in a way which avoided seeking views on the central issues raised by the substantive duty.

75.   I do not believe that the view which I have taken would put authorities under any unreasonable burden. The statutory language leaves them with a very broad discretion as to how to satisfy the obligations under section 3, as indeed it appears that the Government intended. I would make four particular points:

(1)        I fully accept that it cannot have been the statutory intention that every time that an authority makes a particular operational decision, by way of outsourcing or otherwise, it is required by section 3 to consult about that decision simply because that could be said to be part of “the way in which” it performs its functions. … in this context that phrase connotes high-level issues concerning the approach to the performance of an authority’s functions, and it is about those and not about particular implementation that consultation is required.

(2)        Because here the Council never set out to consult about its outsourcing programme at all, the present case is not a good occasion to offer guidance on the form that such a consultation might have taken. The essential is simply that the representatives should have been given the opportunity to express views or concerns about outsourcing the functions or services in question that could inform the Council’s decision-taking both on whether to proceed and on matters requiring attention in the arrangements eventually made. I repeat that that does not mean that it should have consulted on all the particular decisions, great or small, that fell to be taken by way of implementation …

(3)        … useful responses are most likely to be obtained if consultees are informed of the broad context in which outsourcing decisions have to be taken, …  consultation is best timed as part of the annual budgetary process. …

(4) The statute provides for consultation with representatives “of the four classes specified.”                                                                                                                                                                                                                

As to the PSED under Section 149 of the Equality Act 2010, the Judge said, at para 80:  

“The Claimant submits first that the Council should have conducted an EIA prior to making the 2010/2011 decisions. … If I had granted permission I do not believe that I would have found a breach of the public sector equality duty in this respect. Such impact as the outsourcing of the functions and services in question might have on persons with protected characteristics was not liable to affect the basic decision to proceed: detailed consideration would only be required when the details of the outsourcing arrangements were being worked out.”

As regards a particular contract and the PSED, the Claimant’s case was that the Council had inadequate information about the potential impact of the changes.  The Judge did not believe that there was an arguable breach of duty.  The Judge observed, at para 85:

“Public sector equality challenges are rather too easily advanced in vacuo. …”

Finally, as regards breach of fiduciary duty, the Judge said, at para 88:

“Views can no doubt legitimately differ about the degree of financial analysis appropriate before taking a decision to proceed with outsourcing as opposed to the other options which were appraised.  But the evidence does not come close to establishing the kind of reckless disregard of the principles of financial planning or management that is necessary to make good a claim of this kind.”

In R (Buck) v Doncaster MBC [2012] EWHC 2293(Admin) Hickinbottom J considered the respective powers of an Elected Mayor and his Executive Cabinet on the one hand and the Full Council on the other hand and the division and demarcation between them.  He held that the Executive had acted lawfully in declining to implement a purported direction by a two thirds majority of Full Council relating to the provision of library services.  This was an executive function.  It made no difference that the direction was by way of an amendment by Full Council to the authority’s annual budget as proposed by the Mayor.  The Mayor’s decision not to spend the allocated funds in accordance with the terms of the amendment was not “contrary to or not wholly in accordance with, the budget”. 

The starting point of course is that under the Local Government Act 2000 the default position is that a function being an executive function is the default position.  That is the case save where specific provision provides that they are non-executive.  This generally resolves itself in England into a matter of interpretation of the Local Authorities (Functions and Responsibilities) (England) Regulations 2000, SI 2000/2853, as frequently amended.  The vast majority of an authority with executive arrangements business is executive business. 

There are, however, a range of non-executive functions.  These include approving the authority’s budget and adopting various plans and strategies. 

Nonetheless, the role of the Full Council in the budget process is limited to the allocation of resources to meet the authority’s potential expenditure for a future period (usually the next financial year), which enables it to set an appropriate level of council tax.  This means that executive functions cannot be exercised in a way which means the budget would be exceeded.  It does not mean that the obligation to estimate revenue expenditure that will be incurred by the authority in the following year entails a power for Full Council to prescribe that certain expenditure must be spent by the executive in certain ways.  The legislative regime as to how executive and non-executive functions should be divided cannot be upset by provisions relating to the calculation of council tax.  The budgetary process is geared to ensuring that there is no budget deficit.  It does not allow Full Council to micro-manage the authority’s functions and interfere with executive functions, only to allocate more or less funds to the Mayor. 

As Hickinbottom J put it at para 64:- 

“It is open to the full Council to amend the budget, wholly or in some of its constituent parts, downwards, thereby depriving the Mayor of the available funds to do what it might otherwise wish to do in the way in which it might wish to do it. If the budget is cut, that will not of course force the Mayor to perform an executive function only in the way the full Council may wish; he may decide to perform it in a different way, with the reduced funds allocated to him. Similarly, the full Council might amend the budget upwards, making additional funds available to the Mayor to spend in exercising his functions; but, equally, that does not force the Mayor to perform the executive function only in the way the full Council may wish.” 

            At para 75 Hickinbottom J concluded:- 

            “If, as I have found, the true construction of the regulatory scheme is that the decision as to how to provide library services is an executive decision for the Mayor, and not a decision for the full Council, it cannot have been improper for the Mayor to come to his own decision, as charged by the statute, rather than complying with the direction of the full Council, who had no proper part to play in that specific decision at all. Indeed, as Mr Giffin submitted, for the Mayor and the Cabinet to have merely followed the direction of the full Council, treating it as binding on them (as the Claimant contends it was) would itself have been unlawful, as it would have improperly fettered the decision-making discretion of the executive in relation to those facilities.”

In Anderson v London Fire & Emergency Planning Authority, UKEAT/0505/ 11/SM, the EAT considered whether a term in a Collective Agreement with respect to the third year of a three year pay deal was apt to be incorporated in the contracts of employment of the Authority’s employees, and, if so, how that term should be interpreted. The Authority’s Collective Agreement with the Trade Unions gave the employer two options for the pay increase in the third year. It did not state which took precedence. The EAT held that the term had been incorporated.

The term was not insufficiently certain, either because it provided for a pay increase to be determined partly by reference to a sum to be agreed between third parties, or because it provided for the paying party to choose between two alternative methods of calculation.

The EAT however upheld the ET’s dismissal of the employees’ claims. The ET did not err in holding that the subjective intentions of the parties to the Collective Agreement were irrelevant when considering its interpretation. Nor did they err in having regard to the wording of the Collective Agreement rather than the negotiations which led up to it, even if paying the higher of the two options had been discussed. Nor was it material that the Union negotiator told the ET that he would not have agreed that management could choose the pay increase option which was most advantageous for them.

The EAT regarded the meaning of the relevant provision of the Collective Agreement as being clear. “Or” meant what it said. The Authority fulfilled their contractual obligation by paying in accordance with one alternative. The Authority was not obliged to pay whichever alternative would give the higher increase.

In Health and Safety Executive v Wolverhampton City Council [2012] UKSC 34 the Council, in its capacity as Local Planning Authority, granted planning permission for four blocks of student accommodation in proximity to a site used for storage of liquefied petroleum gas. Three of the blocks had been completed.  Work on the fourth had not commenced. Concerned that the storage facility constituted a danger to human life, the HSE applied for an order to revoke or modify the planning permission under s97 of the Town and Country Planning Act 1990.  In refusing the application, the Council took into account its liability to pay compensation under s107 of the Act were it to revoke planning permission in respect of all four blocks, but it did not consider whether the application should be granted only in respect of the fourth block.  The HSE brought judicial review proceedings challenging, among other things, the Council’s decision not to revoke or modify the planning permission.  The Court of Appeal held by a majority that a decision under s97 of the Act was to be taken not in isolation but within the statutory framework of the Act which imposed a liability to pay compensation if an order was made under the section. Accordingly, the Council, when reconsidering the matter, would be entitled to take into account its liability to pay compensation under s107 of the Act.

The HSE appealed to the Supreme Court against this part of the decision of the Court of Appeal: the issue being whether it is always open to a LPA, in considering under s97 of the Act whether it appears to be expedient to revoke or modify a permission to develop land, to have regard to the compensation that it would or might have to pay under s107.

The SC unanimously dismissed the HSE’s appeal. Lord Carnwath said that, in simple terms, the question is whether a public authority, when deciding whether to exercise a discretionary power to achieve a public objective, is entitled to take into account the cost to the public of so doing. As custodian of public funds, the authority not only may, but generally must, have regard to the cost to the public of its actions, at least to the extent of considering in any case whether the cost is proportionate to the aim to be achieved, and taking account of any more economic ways of achieving the same objective.

The SC held that s97 of the Act requires no different approach. The section requires the authority to satisfy itself that revocation is “expedient”, and in so doing to have regard to the development plan and other “material considerations”.  The word “expedient” implies no more than that the action should be appropriate in all the circumstances. Where one of those circumstances is a potential liability for compensation, it is hard to see why it should be excluded. “Material” in ordinary language is the same as “relevant”. Where the exercise of the power, in the manner envisaged by the statute, will have both planning and financial consequences, there is no obvious reason to treat either as irrelevant.

Under s97, a planning authority has a discretion whether to act, and, if so, how. If it does decide to act, it must bear the financial consequences. S97 creates a specific statutory power to buy back a permission previously granted. Cost, or value for money, is naturally relevant to the purchaser’s consideration.

Sufficient consistency is given to the expression “material considerations” if it is treated as it is elsewhere in administrative law: that is, as meaning considerations material (or relevant) to the exercise of the particular power, in its statutory context and for the purposes for which it was granted. Furthermore, in exercising its choice not to act under s97, or in choosing between that and other means of achieving its planning objective, the authority is to be guided by what is “expedient”. No principle of consistency requires that process to be confined to planning considerations, or to exclude cost.  Possible difficulty in assessing precisely the likely level of compensation is no reason for not conducting the exercise, still less for leaving cost considerations out of account altogether.

However, the weight attributable to cost considerations will vary with the context.  There may be situations where cost could rarely be a valid reason for doing nothing, but could well be relevant to the choice between effective alternatives.