Consultation - safe passage

November 7, 2014

The Supreme Court recently considered for the first time the public law principles in relation to consultation. Nicholas Dobson examines the outcome.

The villain in Conan-Doyle’s Hound of the Baskervilles describes with evil relish the dire, quicksand-like features of the ‘great Grimpen Mire’ on Dartmoor. "A false step. . .means death to man or beast". For: "Only yesterday I saw one of the moor ponies wander into it. He never came out."

Consultation for local authorities can be a bit like crossing a legal Grimpen Mire, even though the consequences are less likely to be fatal. So it’s fortunate that the Supreme Court recently gave authorities some valuable insights into the nature and purpose of consultation. And these should enable safer passage across this hazardous morass.

The case in question (concerning the lawfulness of Haringey Council’s consultation concerning its Council Tax Reduction Scheme – CTRS) was R (Moseley) v. London Borough of Haringey [2014] UKSC 56, the decision in which was handed down on 29 October 2014. The main judgment was delivered by Lord Wilson with whom Lord Kerr agreed. Lord Reed also allowed the appeal for slightly different reasons and Lady Hale and Lord Clarke agreed with both judgments.

Background

Lord Wilson started by summarising the essential point at issue: "When Parliament requires a local authority to consult interested persons before making a decision which would potentially affect all of its inhabitants, what are the ingredients of the requisite consultation?"

As indicated, the instant process concerned the Council’s CTRS which as from 1 April 2013 replaced the former Council Tax Benefit (CTB) which had provided relief to certain persons from all or part of their annual obligation to pay Council Tax. Under CTB, central Government had reimbursed local authorities pound for pound for their shortfall in providing the CTB. However, for 2013/2014 reimbursement to each local authority was fixed at 90% of the sum it had received in the previous year and each authority was required to make a CTRS for those whom it considered to be in financial need.

Before making a CTRS authorities had to consult interested persons on a draft scheme. Paragraph 3 of Schedule 1A to the Local Government Finance Act 1992 (entitled ‘Preparation of a scheme’) provided (at 3(1)) that before making a scheme an authority must in the following order:

‘(a) consult any major precepting authority which has power to issue a precept to it,

(b) publish a draft scheme in such manner as it thinks fit, and

Then (by paragraph 3(3)), having made a scheme, the authority must publish it in such manner as the authority thinks fit.

In the light of a report substantially drafted by Paul Ellicott, Head of Haringey Council’s Revenues, Benefits and Customer Services, in July 2012, the Council’s Cabinet decided to follow Mr Ellicott’s recommendation and consult on the basis that Haringey’s CTRS should provide that the shortfall be met by a percentage reduction in the amount of CTB payable to all claimants other than pensioners. Because pensioners would not be meeting their share the percentage reduction for other claimants would have to rise to between 18% and 22%. Consequently, other than pensioners, those in receipt of full CTB would have to pay between 18% and 22% of their Council Tax liability.

In addition to posting a consultation document online and inviting all residents to respond to it, Haringey delivered hard copies by hand to each of its 36,000 households entitled to CTB, together with a covering letter signed by Paul Ellicott. This indicated (amongst other things) that:

"At present the Government gives us the money we need to fund Council Tax Benefit in Haringey. We will receive much less money for the new scheme and once we factor in the increasing number of people claiming benefit and the cost of protecting our pensioners, we estimate the shortfall could be as much as £5.7m.

This means that the introduction of a local Council Tax Reduction Scheme in Haringey will directly affect the assistance provided to anyone below pensionable age that currently involves council tax benefit."

Lord Wilson noted the importance of the extract in bold of Mr Ellicott’s consultation letter which indicated that the government funding shortfall meant that any CTRS scheme introduced in Haringey – and not just the one proposed – would need to meet the shortfall by a reduction from existing levels of CTB. But, said Lord Wilson: ". . . the shortfall did not necessarily have that consequence." And why "...was Mr Ellicott not there recognising that at least there were other options, albeit not favoured by Haringey, for meeting the shortfall?"

So, the consultation document contained no: "....reference to options for meeting the shortfall other than by a reduction in relief from council tax, namely to the options of raising council tax or of reducing the funding of Haringey’s services or of applying its deployable reserves of capital (which amounted to £76.8m in March 2012); and it follows that there was no explanation of why Haringey was not proposing to adopt any of those three options."

Consequently, and contrary to the Council’s contention, Lord Wilson considered that consultees were in effect: ".....presented with an assumption that the shortfall in government funding would be met by a reduction in the relief from council tax afforded to recipients of working age, rather than that it should be met in other ways so that the level of their relief might be preserved."

Following the consultation, on 17 January 2014 in the light of a report substantially drafted by Mr Ellicott, the Council adopted the suggestion within the report that it make a CTRS providing for a reduction in relief in 2013-14, below the 2012-2013 CTB level, of 19.8% other than for pensioners and the disabled. This CTRS came into operation on 1 April 2013.

Court’s view

There were two slightly different legal analyses which nevertheless led to the same outcome. This was that, although the consultation was unlawful (per Lord Wilson), "....it would not be proportionate to order Haringey to undertake a fresh consultation exercise in relation to a CTRS which will have been in operation for two years and which it is not minded to revise".

But whilst Lord Wilson considered that the consultation failed because it was unfair, Lord Reed considered that it was unlawful because the statutory purpose of the consultation process had not been met.

Lord Wilson

In Lord Wilson’s view, whether the duty to consult has been generated by statute or by the legitimate expectation of prospective consultees, the "same common law duty of procedural fairness will inform the manner in which the consultation should be conducted". As Lord Reed indicated (at paragraph 35) legitimate expectation will usually arise "from an interest which is held to be sufficient to found such an expectation, or from some promise or practice of consultation". But fairness, said Lord Wilson, "is a protean concept" (Proteus being the sea-god, fabled to assume various shapes). Which means that what is fair is very much dependent upon the specific context, facts and circumstances in question.

In the context of consultation (per Lord Reed in R (Osborn) v. Parole Board [2013] UKSC 61), the duty to act fairly is "liable to result in better decisions, by ensuring that the decision-maker receives all relevant information and that it is properly tested". It will also avoid "the sense of injustice which the person who is the subject of the decision will otherwise feel". There is also a third purpose which reflects "the democratic principle at the heart of our society". This is: "Required, as we are, to make a taxation-related scheme for application to all the inhabitants of our Borough, should we make one in the terms which we here propose?"

The ‘Gunning’ criteria for consultation fairness (per R v. Brent London Borough Council, ex parte Gunning (1985) 84 LGR 168) were also specifically endorsed and noted as "a prescription for fairness". These are that:

Consultation must be at a time when proposals are still at a formative stage;
The proposer must give sufficient reasons for any proposal to permit of intelligent consideration and response;
Adequate time must be given for consideration and response; and
The product of consultation must be conscientiously taken into account in finalising any statutory proposals.

In R v. North and East Devon Health Authority, ex parte Coughlan [2001] QB 213 Lord Woolf elaborated on the requirements for properly conducted consultation, pointing out that "....the consulting authority is not required to publicise every submission it receives or (absent some statutory obligation) to disclose all its advice."

For its obligation "is to let those who have a potential interest in the subject matter know in clear terms what the proposal is and exactly why it is under positive consideration, telling them enough (which may be a good deal) to enable them to make an intelligent response". And this obligation, "although it may be quite onerous, goes no further than this".

Lord Wilson added two further general points which "emerge from the authorities". Firstly, "the degree of specificity with which, in fairness, the public authority should conduct its consultation exercise may be influenced by the identity of those whom it is consulting". So, for instance, a local authority consultee would probably be able to respond satisfactorily to a less specific consultation than would members of the public. Secondly (per Simon Brown LJ in R v. Devon County Council, ex parte Baker [1995] 1 All ER 73): "the demands of fairness are likely to be somewhat higher when an authority contemplates depriving someone of an existing benefit or advantage than when the claimant is a bare applicant for a future benefit".

And sometimes, said Lord Wilson, "particularly when statute does not limit the subject of the requisite consultation to the preferred option, fairness will require that interested persons be consulted not only upon the preferred option but also upon arguable yet discarded alternative options". He therefore agreed with Underhill J below who had concluded that "consulting about a proposal does inevitably involve inviting and considering views about possible alternatives". In the circumstances, it "would not have been onerous for Haringey to make brief reference to other ways of absorbing the shortfall", as for instance Birmingham Council did, which asked on CTRS consultation:

"... if you .... think the Council should make an additional contribution from its own finances to the [CTRS], how do you think this should be funded? In particular, should the Council increase Council Tax, or cut other Council services, or both?"

In Lord Wilson’s view, Birmingham’s approach was fair.

As to Haringey’s consultation, however, Lord Wilson did not accept the conclusion of the Court of Appeal below that the Council’s "consultation exercise had been lawful because the other options would have been reasonably obvious to those consulted". He considered that Haringey’s message to those consulted was that other options were irrelevant and in such circumstances he could not "agree that their assumed knowledge of them saves Haringey's consultation exercise from a verdict that it was unfair and therefore unlawful". It was not, however, unlawful that the Council had failed to consult on the possible adoption of a Transitional Grant Scheme announced by the Government only five weeks before the completion of the draft CTRS consultation.

And although the consultation had been unlawful, Lord Wilson concluded that it "would not be proportionate to order Haringey to undertake a fresh consultation exercise in relation to a CTRS which will have been in operation for two years and which it is not minded to revise".

Lord Reed

Whilst indicating general agreement with Lord Wilson, Lord Reed said that he would prefer to express his "....analysis of the relevant law in a way which lays less emphasis upon the common law duty to act fairly, and more upon the statutory context and purpose of the particular duty of consultation...." in question. For the Haringey case is concerned with the statutory duty of consultation and such duties will "vary greatly depending on the particular provision in question, the particular context, and the purpose for which the consultation is to be carried out".

In Lord Reed’s view, the duty to act fairly was not central to the present case. For he considered that the purpose of public consultation in the present context is "not to ensure procedural fairness in the treatment of persons whose legally protected interests may be adversely affected, as the common law seeks to do" but "to ensure public participation in the local authority’s decision-making process".

And for a consultation to meet that objective it must meet certain minimum requirements. For: "Meaningful public participation in this particular decision-making process, in a context with which the general public cannot be expected to be familiar, requires that the consultees should be provided not only with information about the draft scheme, but also with an outline of the realistic alternatives, and an indication of the main reasons for the authority’s adoption of the draft scheme."

But in the present case it was "difficult to see how ordinary members of the public could express an intelligent view on the proposed scheme, so as to participate in a meaningful way in the decision-making process, unless they had an idea of how the loss of income by the local authority might otherwise be replaced or absorbed."

The problem with the Council’s consultation document was that it "presented the proposed reduction in council tax support as if it were the inevitable consequence of the Government’s funding cuts, and thereby disguised the choice made by Haringey itself". Because the Council misleadingly implied that there were no possible alternatives to that choice, there was in reality "no consultation on the fundamental basis of the scheme".

Lady Hale and Lord Clark

In a short, one paragraph, judgment, Lady Hale and Lord Clark agreed with both Lord Wilson and Lord Reed. For whilst they agreed "with Lord Reed that the court must have regard to the statutory context and that, as he puts it, in the particular statutory context, the duty of the local authority was to ensure public participation in the decision-making process", nevertheless, to do so an authority must act fairly by taking the specific steps set out by Lord Reed above i.e. not only providing consultees with information about the draft scheme but also with an outline of the realistic alternatives and the main reasons for the authority’s adoption of the draft scheme. So although the judgments of Lords Wilson and Reed arrived at the same conclusion by an apparently different route, as Lady Hale and Lord Clark indicated, they were broadly in synchrony.

Conclusion

Public law contains many hazards for authorities taking decisions likely to have an adverse effect upon sections of their public. But if authorities proposing a consultation exercise take into account relevant principles of fairness and also make sure they fulfil the consultation’s proper purpose, they are more likely to travel safely across this particular part of the legal Grimpen Mire and avoid their decisions sinking unlawfully into the morass.

Nicholas Dobson is a Consultant with Freeths LLP specialising in local and public law. He is also Communications Officer for Lawyers in Local Government.