Corby Borough Council, R (on the application of) v Secretary of State for Communities and Local Government [2007] EWHC 1873 (Admin)

[2007] EWHC 1873 (Admin)Case No Case No: CO/8313/06CO/8509/06
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 31 st July 2007
Before
THE HON. MR JUSTICE NEWMAN
Between
The Queen on the application ofClaimantCORBY BOROUGH COUNCILClaimantTHE SECRETARY OF STATE FOR COMMUNITIES AND LOCAL GOVERNMENTDefendant
Between
The Queen on the application ofClaimantSLOUGH BOROUGH COUNCILClaimantTHE SECRETARY OF STATE FOR COMMUNITIES AND LOCAL GOVERNMENTDefendant
James Goudie QC and Philip Coppel (instructed by the respective Legal Departments of Corby Borough Council and Slough Borough Council) for ClaimantsClive Sheldon (instructed by Treasury Solicitor) for DefendantsHearing Hearing dates: 27 th and 28 th June 2007
Judgment

Introduction

[1]The claim of Corby Borough Council (“Corby”) and the claim of Slough Borough Council (“Slough”) against the Secretary of State for Communities and Local Government (“the Secretary of State”) have been listed together pursuant to two Orders of Silber J. made on 16th March 2007. He granted permission for the claim by Corby and ordered a “rolled-up” hearing of the claim by Slough.[2]Both claims relate to a scheme devised and operated by the Secretary of State known as the Local Authority Business Growth Incentives (“LABGI”) scheme. The Secretary of State has described LABGI as “… a revolutionary grant which distributes new money to local authorities….”. It is common ground that the express purpose of LABGI is to enable local authorities to receive a direct financial benefit as a reward for increased receipts of business rates within their area. The Secretary of State puts the purpose as follows:
“LABGI is designed to be an incentive scheme, intended to reward local authorities for economic growth and to facilitate further growth”
. In evidence to this Court on behalf of the Secretary of State it is said that: “LABGI is designed to give local authorities a direct financial reward for an increase in business growth in their areas by allowing an individual authority to retain a proportion of revenues by increasing business growth above a predetermined floor”.[3]Reduced to its simplest, under LABGI, a local authority can become entitled to receive a grant where the annual growth in business rates receipts in its area exceeds a target. The scheme is arithmetically based. Once the target for that local authority is calculated, a multiplier (of 0.415) is applied to the growth above that target. The local authority is entitled to a grant equal to 70% of that figure, up to a certain ceiling. The scheme does not cap the total amount that is available for paying out.[4]By grant determination dated 7th February 2006 the Secretary of State determined the grant under LABGI for each local authority in England for the period 1st January 2005 to 31st December 2005 (“the grant determination”).[5]Both Corby and Slough claim that they secured very significant growth in their business rates over the period 1st January 2005 to 31st December 2005. Despite the Secretary of State not disputing this, the grant determination provided that each of the two Councils was to receive a nil incentive payment. In essence, it is said the increases do not qualify as increases under the scheme, alternatively, if they are within the scheme, that there is an overriding public interest in the Secretary of State not being bound to calculate increases of the character in question as part of the scheme.[6]Corby and Slough followed the Secretary of State’s review procedure but the grant determination so far as it related to them was maintained. Corby and Slough now challenge the lawfulness of those decisions.[7]The two claims share much in common. Their similarity underlies the Order of Silber J. directing that they be heard together. The common background will be considered first, then the facts specific to each claim, before turning to the grounds of challenge (which are essentially common to both claims).

Essential background

[8]LABGI is a new financial arrangement put in place by HM Treasury and the Office of the Deputy Prime Minister (“ODPM”) (which has become the Department for Communities and Local Government) whereby local authorities are now to retain a share of non-domestic (i.e. business) rates generated in their area. Until this arrangement was in place, although a local authority was responsible for collecting non-domestic rates in its area, the money was paid into consolidated revenue and a local authority was not rewarded for business rates receipts.[9]A proposal for such a scheme was announced in November 2002 by the Chancellor of the Exchequer in the Pre-Budget Report.[10]Subsequently, in July 2003, the ODPM issued a consultation paper entitled ‘Local Authority Business Growth Incentives’. In its foreword it stated: “….This consultation sets out a scheme for reforming [the arrangement where business rate revenues are paid into a central pool so that local authorities get no direct individual or local benefit] by allowing local authorities direct retention of some business rate revenues...”.[11]Two of the stated guiding principles for implementation of the scheme were that “the distribution of benefits must be fair” and that “the scheme should be as intelligible and transparent as possible”. Appendix A, entitled ‘Technical Working of the Scheme’, stated:
“Growth itself [in rateable value] is measured each year using the rateable value of additions to the ratings list plus the net increase as a result of enhancements less the number of demolitions. This amount is also adjusted for the movement of empty properties by comparing the amount granted in empty property and partially empty property relief for the year in question with the starting point as adjusted for revaluation.” 12. The effect of appeals against rating valuations was given specific consideration: “A.22 Since valuations for rating purposes are made by central government agencies, authorities will not see their rewards under the scheme reduced by successful appeals. To do so would be unfair to authorities and would introduce uncertainty and complexity to the scheme.”
Further:
“For the purposes of LABGI, the effects of appeals are ignored since they were outside an authority’s control. LABGI will therefore work on adjusted rating lists.”
As we shall see, this was not the only adjustment which was brought into play.[12]There was an extensive consultation period which ended on 31st October 2003 and an administrative “dry run” which was taken into account in 2004. The dry run involved 40 local authorities. It recorded that the majority of these local authorities had raised concerns about the accuracy and validity of estimating growth in rating values. In allaying those concerns, the Secretary of State advised that the effect of appeals would be ignored and explained why empty and partially occupied properties would be taken into account:
“…because they reflect real growth or decline, which authorities can influence…”
Under the heading Worked Example of the Scheme it stated:
“At the end of the first year a new list of rateable values will be produced as at 31 December 2005 adjusted for empty and partially empty property relief. These will be compared with the starting list to calculate the growth rates.”
[13]On 21 July 2005, in a written statement to Parliament, the Minister for Local Government announced the final details of the LABGI scheme. The statement set out five principles for the scheme, which included:
“- that the distribution of benefits must be fair, reflecting relative performance not relative circumstances; and - that the scheme should be as intelligible and transparent as possible.”
The statement continued:
“Business growth is measured in terms of the increase in a local authority’s rateable value during a calendar year.”
[14]A public announcement from the Minister stated, inter alia: “A single payment will be made to each local authority in the final quarter of the financial year. It will be based on actual changes to rateable values in the previous calendar year, provided by the Valuation Office Agency”.[15]At the same time, the ODPM issued a Note for Local Authorities on the Local Authority Business Growth Incentives Scheme which stated:
“Business growth will be measured in terms of the increase in a local authority’s rateable value during a calendar year. LABGI revenue will be paid as a single payment to each local authority in the final quarter of each financial year so the first payment will be made around February 2006. This will be based on actual changes to the rateable values in the previous calendar year, provided by the Valuation Office Agency”
. Under the rubric “Measuring growth”, the statement provided:
“At the end of the first year the VOA will provide a new list of rateable values as at 31 December 2005 (gross of appeals, and net of empty and part-empty property reliefs). These will be compared to the starting list (From 31 December 2004) to calculate growth rates. Growth above the floor is then multiplied by the business rate multiplier.”
A worked example at the back of the document was to the same effect.[16]On 7 February 2006 the Minister for Local Government made the grant determination for the year 1st January 2005 to 31st December 2005. As noted above, in relation to both Corby and Slough, he determined a grant of nil.[17]As we shall see, the features of the scheme upon which the Secretary of State principally relies are that it was made clear that the scheme would rely upon the rateable values data provided by the Valuation Office Agency (“the VOA”) and that this figure would not be reduced by successful appeals.

Events as they have affected Corby

[18]Corby was unable to reconcile a nil grant with its own figures and calculations. In April 2005 a 46,500m² warehouse called “Unit 2, Max Park” had been added to the rating list for Corby. By July 2005 it was fully occupied, with a rateable value of £2,370,000. That warehouse alone represented a 3.3% growth in the business rate for Corby. It is submitted that that growth, on an application of the LABGI scheme as published, should have resulted in a grant to Corby of approximately £200,000 in 2006, with higher payments in 2007 and 2008.[19]By e-mail dated 12th April 2006, the Head of Corby’s Financial Services sought an explanation for the nil grant. A response was given on 27th April 2006. It included:
“Between 1.4.05 and 31.12.05, the LABGI data was constructed by the VOA by reference to properties on the rating list which had a change of rateable value during that period recorded against one of four change codes: new properties in, deleted properties out, reconstituted properties (mergers) and reconstituted properties (splits). Therefore, the LABGI data would not have been altered by successful appeals during this period.”
This response shed little or no light on the position but the reference to the “four change codes” is noteworthy.[20]As a result of an e-mail dated 10th May 2006 from the Secretary of State’s Department, Corby was able to deduce that, in relation to Unit 2 Max Park, those administering LABGI:
“(1) Had recorded the warehouse as increasing the rateable value of properties in Corby by £445,000 only. That was the rateable value of the part of the warehouse that was occupied as at 1 April 2005, being the date when the warehouse was first added to the rating list. The limited recorded increase in rateable value (£445,000) was insufficient to allow Corby to reach the “floor” for receipt of any LABGI grant. (2) Had not recorded the increased rateable value of the warehouse upon it being fully occupied (July 2005), thereby leaving out an increase in its rateable value of £1,925,000.”
Corby appealed against the 7th February 2006 grant determination. The limited recorded increase in rateable value (£445,000) was insufficient to allow Corby to reach the “floor” for receipt of any LABGI grant.[21]By letter dated 11 July 2006, the appeal was rejected. The reasons included:
“Alterations to hereditaments which are not deleted (such as expansions/contractions in existing hereditaments) are recorded under change code 20. As this code does not distinguish changes due to recent successful appeals against the 2000 list, a decision was made not to use this code. As a result, business premises expansions/contractions were not counted as growth/reductions for LABGI purposes. I understand that a new warehouse in Corby was given a reduced rateable value of approximately a fifth (on 1 April 2005) until it was fully occupied. The fact that the increase in RV on this warehouse (which we understand was picked up under change code 20) was not counted as LABGI growth is a consequence (albeit unfortunate for Corby) of the method used to calculate LABGI RV growth in year one. Of course, any decreases in RV due to ‘contractions’ to existing hereditaments in Corby would also not have been counted.”
The reasons included a refusal to make an “exception” for Corby on the basis that it would:
“require changing the data calculation method so that change code 20 is used” and that it “would not be fair on local authorities as a whole...”
[22]Subsequent correspondence from the Secretary of State’s Department revealed that there was only one council (i.e. Corby) that had provided evidence of a completely new property coming onto the Valuation List during 2005 that had not been counted for LABGI grant purposes. That correspondence also revealed:(1) That the total net value of changes to the 2005 Rating List resulting from code change 20 and made between 1/4/05 and 31/12/05 was £10,881,636, of which £2,029,050 was attributable to Corby.(2) That although up to £935 million had been allocated to local authorities through LABGI in England over three years, only £126.6 million had been allocated in the first year.

Events as they have affected Slough

[23]Slough's rateable value as of 31st December 2004, based on rateable values supplied by the VOA, was £209.5 million. Its expected year-end position as at 31st December 2005 was £210.9 million.[24]The increase in Slough's overall rateable value during the 2005 calendar year was, to a substantial extent, due to two large-scale redevelopments which took place within its area during 2005. In particular:(1) During 2005 Tesco redeveloped its supermarket in Slough substantially, as a result of which the store became the biggest Tesco supermarket in the country. Between January and March 2005 the entire store was demolished, save for an existing petrol forecourt. The new shop was completed in the summer of 2005. This led to an increase in the rateable value of the premises from £2 million to £3.9 million (“the Tesco premises”).(2) Also during 2005 the Royal Mail undertook a substantial redevelopment of a large building within Slough's area, as a result of which its rateable value increased by £3.5 million (“the Royal Mail premises”).[25]As a result of these increases in rateable values within Slough's area during 2005, Slough calculate that it should have received a grant under LABGI of approximately £800,000. But under the grant determination the Secretary of State gave Slough a nil grant.[26]The stated reason for the grant of nil was that the Secretary of State calculated Slough's year-end rateable values as £202.3 million, i.e. a decrease in rateable values of some £7 million. The cause of the discrepancy appeared to Slough to be that, whilst amendments to the valuation list prior to 31st March 2005 had been taken into account, amendments to the valuation list between 1st April 2005 and 31st December 2005 had been disregarded. This meant that a decrease in the rateable value of the Tesco premises of £2 million due to the demolition of the old store was taken into account, but the subsequent increase in the rateable value of the new store of £3.9 million was disregarded. Similarly, the increase in the rateable value of the Royal Mail premises in the summer of 2005 of £3.5 million was disregarded.[27]By letter dated 15th May 2006 Slough's Strategic Director of Finance and Property wrote to the Secretary of State seeking an explanation of the failure to award Slough an appropriate grant under LABGI.[28]Notwithstanding Slough's complaint, on 19th July 2006 the Minister of State made the Local Authority Business Growth Incentive Scheme Grant Determination (No 3) 2006 (No 3A/491). The Minister of State again determined that Slough should receive no grant under LABGI in respect of growth of business rates within Slough's area during 2005.[29]On 20th July 2006, the Head of Local Government Finance Capital, Finance & Analysis Division, responded to Slough's Strategic Director of Finance and Property stating as follows:
“A policy decision to calculate RV data 'gross of appeals' (i.e. not reduced by successful appeals) was made following the evaluation of the LABGI administrative dry run with volunteer authorities, and the 2004 consultation. The dry run evaluation showed that in nearly all cases, a successful appeal would attribute a lower RV for a particular hereditament resulting in negative growth in RV. This would therefore potentially reduce the amount of LABGI grant received by the local authority through no fault of their own ...... the VOA constructed end year data using four change codes: (i) new properties in; (ii) deleted properties out; (iii) reconstituted properties (mergers); and (iv) reconstituted properties (splits). This method meant that the end year RV would not be affected by successful appeals against both the 2005 and 2000 rating list, thereby achieving the policy aim of calculating growth gross of appeals. Alterations to hereditaments which are not deleted (such as expansions/contractions in existing hereditaments) are recorded under change code 20. As this code does not distinguish changes due to recent successful appeals against the 2000 list, a decision was made not to use this code. As a result, business premises expansions/contractions were not counted as growth/reductions for LABGI purposes. In Slough's case, the re-developed supermarket had an RV of £2m on 1 April 2005; when the re-development was complete in summer 2005, the RV increased to £3.9m. The fact that the increase in RV (which we understand was picked up under change code 20) was not counted as LABGI growth is a consequence (albeit unfortunate for Slough) of the method used to calculated RV growth in year one ...”
[30]The Leader of Slough wrote to the Secretary of State on 6th September 2006 complaining about the unfair treatment of Slough but, as far as the Court is aware, no reply has been received to that letter.[31]It is said that as a result of the Secretary of State's determination of a nil grant, Slough has been deprived of approximately £800,000 by way of LABGI grant to which it was legitimately entitled.

The essential facts

[32]Close attention was given to the evidence in the course of the hearing. It became clear that the Secretary of State had at no time during either the lengthy consultation period or “the dry run” addressed what should happen under the scheme when actual rateable values increased in a calendar year because of increases and expansions to existing properties. The VOA has a duty to compile and maintain the business rating and council tax valuations lists, but it was not set up for the purpose of the LABGI scheme and in its calculations it takes into account all its recognised change codes including, in particular, code 20. Its calculations are made by various local valuation officers upon the basis of data supplied by local authorities.[33]On the evidence before the Court it is likely that no detailed attention was given to the procedures and processes which the VOA would adopt for the purposes of making its calculations under the scheme until, at the earliest, the 7th December 2005. The Minister described the final version of the scheme to Parliament in a written statement on 21July 2005. I have already referred to the content of the statement (paras 13-15 above) but, for convenience, the following parts are repeated:
“… The starting point for each authority is their rateable value at 31 December 2004. An authority’s rateable value figure will not be reduced by successful appeals. Empty and part-empty property reliefs will be netted off, using the most recent set of audited data from the authority’s normal National Non Domestic Rates (NNDR) return. At the end of the first year a new list of rateable values will be produced by the Valuation Office Agency, as at 31 December 2005, not including appeals, but net of empty and part-empty property reliefs. This will be compared to the starting list from 31 December 2004 to calculate each local authority’s growth rate ….”
[34]The approach was repeated in a Note for Local Authorities on the scheme issued by the ODPM in July 2005. It stated:
“…. Business growth will be measured in terms of the increase in a local authority’s rateable value during a calendar year ….. This will be based on actual changes to rateable values in the previous calendar year, provided by the Valuation Office Agency (VOA)… An authority’s RV figure will not be reduced by appeals, whilst empty and part-empty property reliefs will be netted off, using the most recent set of audited data from authorities’ normal NNDR returns ….. At the end of the first year the VOA will provide a new list of rateable values as at 31 December 2005 (gross of appeals, and net of empty and part-empty property reliefs). These will be compared to the starting list (from 31 December 2004) to calculate growth rates ….”
[35]It is clear that it was not realised, until after the 7th December 2005, that the policy decision to exclude appeals, which the VOA was asked to implement, would, unless special attention was given to the issue, result in the exclusion of growth in rateable value in the course of a calendar year when the growth had occurred through expansions and changes to existing properties. This result follows from the character of the data recorded by change code 20 used by the VOA. It records not only appeals but expansions and changes to existing properties as well. By not applying change code 20 the Claimants’ increases therefore fell out of account.[36]The weight of the evidence shows that at the time of the grant determinations in both of the Claimants’ cases the Secretary of State probably did not know why the data supplied to the department pointed to nil returns for the Claimants. By July 2006 the position was clearer: “Alterations to hereditaments which are not deleted (such as expansions/contractions in existing hereditaments) are recorded under change code 20. As this code does not distinguish changes due to recent successful appeals against the 2000 list, a decision was made not to use this code. As a result, business premises expansions/contractions were not counted as growth/reductions for LABGI purposes…… The fact that the increase in RV on this warehouse [Corby’s case] (which we understand was picked up under change code 20) was not counted as LABGI growth as a consequence (albeit unfortunate for Corby) of the method used to calculate LABGI RV growth in year one …”.[37]It is clear that the nil determinations which are challenged in this case are “a result of the method used to calculate” growth. As I have already recorded, the method used apparently received its first detailed attention at a meeting between department representatives and representatives from the VOA on 7th December 2005. The minutes of the meeting are in evidence, but have not been elaborated upon by any witness, somewhat to the detriment of a full and reliable understanding of their content. Under the heading “Overview” the following appears: “LABGI measures the rateable value once at the beginning of the year and once at the end of the year and it measures growth only. We only include increases/decreases on the backs of splits, mergers, new properties and former properties ….. it was agreed that the meeting would focus on exactly what we mean by the expression ‘gross of appeals’”.[38]There was a dispute between the parties as to whether the “we” referred to above reflected the department’s conclusion or whether it recorded the result of what would occur if the VOA were to proceed on the basis that appeals were to be excluded. I shall not attempt to resolve the difference because it is peripheral to the main issue before me. The minutes include notes on the difficulty which would face the VOA if it was required to go through manually and identify changes to the starting data. This gave rise to a recognition that the department would be at risk of judicial review proceedings if the task was not done. But the point being considered was not the point which arises in these proceedings. Finally and, in my judgment, importantly, the minutes record that there was agreement that a memorandum of understanding would be drawn up to “clearly define and outline - in clear English – what the VOA are providing us with and what we need from them”. It is also recorded that a copy of the VOA’s code list was provided by the VOA and it was noted that:
“The data the VOA gives ODPM is adjusted to reflect changes made under the following codes only: O1 – Demolished (deleted from list) O2 – Reconstituted (deleted from list) 10 – New hereditament (added to list) 11 – Reconstituted (added to list)”
O1 – Demolished (deleted from list)

O2 – Reconstituted (deleted from list)

[39]I am satisfied on the evidence before the Court that at no time prior to the respective determinations in this case did the Secretary of State state that growth in rates, arising from part occupied hereditaments becoming fully occupied, expansions and redevelopments, would be ignored under the scheme. It is therefore necessary to consider whether the scheme was promulgated in terms which are sufficiently wide to include such growth factors as part of the scheme.

The ambit of the scheme

[40]Two of the five principles mentioned to Parliament by the Minister were:
“[4] that the distribution of benefits must be fair, reflecting relative performance not relative circumstances; and [5] that the scheme should be as intelligible and transparent as possible.”
Business growth was to be based “on actual changes to rateable values in the previous calendar year, provided by the Valuation Office Agency”. [5] that the scheme should be as intelligible and transparent as possible.”[41]It was stated that actual changes in rateable values were to be used, save in two identified respects, namely that the rateable value would be:(1) gross of appeals; and(2) net of empty and part-empty property reliefs. The effects of appeals were ignored “since they are outside an authority’s control …”.[42]In my judgment, it is clear that the scheme as promulgated was in terms which extended to the actual growth achieved by the Claimants. I reject the fundamental submissions to the contrary advanced on behalf of the Secretary of State. It is said the Minister made it clear that the scheme would rely upon the rateable values provided by the VOA. He did. But that cannot provide an answer to the Claimants’ contentions. It was for the Minister to implement the scheme in accordance with the policy he had promulgated. He failed to instruct the VOA to calculate growth which qualified under the scheme because, after discussion with the VOA, he limited the calculation to the use of four change codes, not including change code 20. In stating that actual changes “provided by the Valuation Office Agency” would be the basis of an award, he did not state he would delegate the assessment to the VOA, nor did it leave the Minister with freedom to rely upon the VOA’s calculations as the actual determination, which it was for the Minister to make. The suggestion also runs flatly contrary to the principle that the scheme was to be “intelligible and transparent”. What in effect is now relied upon “as an intelligible and transparent” aspect of the scheme was not known to the Minister himself until 7 December 2005 (at the earliest) and probably not until the early months of 2006.[43]By an argument, somewhat similar in character, it was submitted that because it had been made clear that the calculation would be gross of appeals and administrative steps were put in place to give effect to this aspect, that was enough to comply with the policy. With respect, it is a hopeless contention. The fact that the appeals policy was implemented by a method which failed to implement another aspect of the policy is an explanation for what occurred but no more.[44]In my judgment, the scheme as promulgated gave rise to a substantive legitimate expectation on the part of the Claimants that their actual rateable growth recorded (gross of appeals and net of empty and part-empty property reliefs) would be rewarded.

The grounds of challenge

[45]The Claimants submit that the grant determination, affirmed on review, constituted a clear departure from the stated purpose of the scheme and there has been a failure to adhere to the stated policy which has defeated the Claimants’ substantive legitimate expectation. Next, it is submitted that, in making the determination, the Minister failed to take account of a relevant and material fact, namely the actual increase in the rateable value of the hereditaments within the Claimants’ areas. Further, that the Minister took into account an irrelevant consideration, namely the administrative effort which would be required in extracting the details of changes under code 20. Lastly, irrationality.[46]As a response to the principal ground, it is said that it was appropriate and lawful for the Secretary of State to have acted (if he did) inconsistently with the policy. Untangling the data recorded by code change 20 would have been administratively burdensome and applying the untangled data fairly and consistently would have affected large numbers of authorities, many of which will have made budgetary and expenditure decisions in reliance on the published grant determination.[47]The only reason given in evidence was that the work involved would be “considerable”. Being an excuse, the onus lies squarely on the Secretary of State to adduce evidence to demonstrate the effort that would have been required. The Secretary of State has not adduced any such evidence or indeed evidence of ever estimating the number of man-hours required. It is apparent that at the time of the Corby decision and the Slough decision the Secretary of State had not carried out any estimate of the number of man-hours that the task would take or indeed any analysis to give an idea of the scale of the task. A rudimentary exercise was carried out in September 2006, after these challenges had been mooted by the Claimants. However, even that did not estimate the number of man-hours the task would take.[48]The recent exercise carried out by the Claimants demonstrates that the scale of the task would in fact not be disproportionate to the amount of money being administered through the scheme: approximately 640 hours’ of work would have done it for all of England.[49]In my judgment, the Secretary of State’s excuse is not factually founded and is legally ineffective to excuse the undisputed departure from the published scheme. I accept that “considerations … that an amended scheme would be more complex and more costly to administer” are not irrelevant (Esfandiari v Secretary of State for Work and Pensions [2006] EWCA Civ 282). But it is clear that no overriding interest sufficient to neutralise the need for fairness and transparency in rewards under the scheme has been made out.

Section 31 of the Local Government Act 2003

[50]Section 31 of the Local Government Act 2003 provides that:
“(1) A Minister of the Crown may pay a grant to a local authority in England towards expenditure incurred or to be incurred by it. (2) A Minister of the Crown, or the National Assembly for Wales, may pay a grant to a local authority in Wales towards expenditure incurred or to be incurred by it. (3) The amount of a grant under this section and the manner of its payment are to be such as the person paying it may determine.”
[51]It has been submitted that, the scheme being discretionary, there existed a sufficient degree of flexibility for the Secretary of State to act as he did. The submission is hopeless. Having exercised his discretion to promulgate a scheme, until notice of change in the policy is given, he is bound to implement the scheme.

Fairness to other authorities

[52]In my judgment, the possibility that a local authority may have received an award to which it was not entitled under the scheme can provide no excuse for not fulfilling the obligation owed to the Claimants. A larger award than that which should have been made could give rise to a claim by an affected local authority that repayment was not due but that is irrelevant to the position of the Claimants’ entitlement. It would amount to no more than the scheme being implemented fairly. That would also be the position if the Minister succeeded in recovering any overpayment.

Overall Conclusion

[53]Having concluded that the Secretary of State has acted so as to defeat the Claimants’ substantive legitimate expectation when he had no legal excuse for doing so, I regard the ground as so clear that the additional grounds, which in content, reflect the full nature of the departure from policy add little or nothing to the case.

Delay

[54]The 7 February 2006 determination gave no reasons and provided no explanation whatsoever. It did not show how the figures had been calculated. It was reasonable for Corby and Slough to seek an explanation from the Secretary of State. The Secretary of State’s FAQs specifically stated that if an error had been spotted, the disappointed authority should e-mail the LABGI e-mail account and promised that the Secretary of State would investigate the query. The Secretary of State’s covering e-mail of 8 February 2006 promised that queries would “be answered as soon as possible.”[55]In a letter dated 9 August 2006 from the Secretary of State to Mr Hymers at Corby it was stated:
“Year one [i.e. 2005] did not have an official appeals process. Instead, local authorities were invited to use the LABGI email account to raise any queries about their grant calculation. We have defined ‘appeals’ as being those authorities who have stated that they believe their calculation is incorrect for a particular reason and that their year one grant should be revised accordingly.”

Corby

[56]More than two months after the grant determination the Secretary of State had still not answered Corby’s request. On 12 April 2006 Corby sent a chasing e-mail. The Secretary of State’s response (12 April 2006) was to suggest that the answer might be available on its Q&A web-page and to suggest that “Question 9 should do the trick.” In fact, Question 9 did not do the trick. Nor did it explain the Corby Decision. By e-mail dated 24 April 2006, Corby pressed for a proper explanation. On 27 April 2006, over 2½ months after the determination, the Secretary of State responded. The Secretary of State, for the first time, attached the breakdown and an explanation of the data. Although the 27 April 2006 e-mail did not give reasons for the determination, for the first time Corby had data from which it was able to piece together the Secretary of State’s decision-making method. As Mr Hymers noted in his letter of 2 May 2006, Corby had up until then:
“...made repeated attempts, via [ODPM] and the Valuation Office, to get information regarding the difference between the actual year end Rateable Value provided by the VOA and the figure used for the LABGI calculation.”
[57]On 10 May 2006 the Secretary of State responded to the request by e-mail. This e-mail was the first occasion when the Secretary of State actually explained how it reached the Corby Decision, revealing for the first time “issues” that had been:
“encountered...which meant that the LABGI data differed from the normal published valuation office data.”
The letter concluded:
“If you have any further queries then please get back to me.”
The Secretary of State’s Pre-Action Protocol Response implicitly accepts that this decision was capable of challenge by way of judicial review.[58]Corby did have further queries and followed the Secretary of State’s suggestion. On the following day (11 May 2006), it appealed. At no time did the Secretary of State suggest that the appeal was misconceived. The Secretary of State did not answer promptly. By e-mail dated 26 May 2006, Corby chased the Secretary of State for an answer.[59]By e-mail dated 29 June 2006, Corby chased the Secretary of State again. On 11 July 2006, the Secretary of State responded. The Secretary of State had taken two months to respond. That decision was the first reasoned consideration received by Corby.[60]On the following day, Corby sought further information from the Secretary of State in order to progress this challenge. Some of that information was provided a month or so later on 9 August 2006.

Slough

[61]By letter dated 15 May 2006 Mr Andrew Blake-Herbert, Slough's Strategic Director of Finance and Property, wrote to the Secretary of State questioning the failure to award Slough an appropriate grant under LABGI. The letter explained fully the basis for the dissatisfaction, concluding:
“We look forward to receiving confirmation that you accept our proposal or to discuss alternative ways of dealing with this anomaly.”
[62]On 19 July 2006 the Minister of State made the Local Authority Business Growth Incentive Scheme Grant Determination (No 3) 2006 (No 3A/491). The Minister of State again determined that Slough should receive no grant under LABGI in respect of growth of business rates within Slough's area during 2005.[63]On 20 July 2006 Mr John McGinty, Head of Local Government Finance Capital, Finance & Analysis Division, responded to Mr Blake-Herbert. He stated:
“You have asked that we review your year one payment calculation so that the increases in RV of the re-developed businesses are counted. This would require changing the data calculation method so that change code 20 is used. This would have to apply to all the year one calculations, which at this late stage would not be fair on local authorities as a whole, particularly as some would see their year one grant reduced by such a change, nor is it practical. I realise that this will be disappointing, but we can not change the year one calculation method for one authority in isolation. The points you have raised regarding the data calculation method are being considered in the round as part of the end of year one review of whether the scheme is meeting its aims. I should emphasise that the review's conclusions will have implications for the scheme in year two; we will not be making retrospective changes to the year one calculation method.”
[64]I accept that the operative decision was thus that of 20 July 2006. But, if I am wrong on that, I unhesitatingly would exercise my discretion to extend time in the light of all the circumstances I have set out above.

Relief

[65]For the reasons set out above, the Claimants are entitled to relief by way of judicial review.[66]The claims are in time. In the case of Corby, Silber J. has given permission without requiring an extension of time. The same reasoning applies to Slough.[67]There are no discretionary grounds for refusing relief. The claims will not open floodgates. Any other local authority that might have a claim out of the 2005 year is self-evidently well out of time.[68]The claims involve very considerable sums of money so far as these Borough Councils are concerned. So far as the Secretary of State is concerned, however, the total spend in the 2005 year (£126.6 million) was well under the £1 billion per annum allocated to the scheme as a whole.[69]The Claimants are entitled to an order quashing the grant determination made in each of their respective cases and to the grant of an order that the Secretary of State reconsiders the grant determination, as it affects the Claimants, in accordance with the terms of this judgment.