Local Authorities and BSF Funding – is there a solution?

The Department for Education’s (DfE) withdrawal of funding for the majority of Building Schools for the Future projects may not at this time be front page news, but the headache for local authorities remains as troublesome as ever.

It is estimated by the Local Government Association that more than £203 million has been spent by 75 councils on the necessary preparatory work for cancelled Building Schools for the Future projects, so what can they do about the DfE's decision and can they get their money back?

The English legal system provides relatively limited remedies for local authorities in a situation like this. There is no general entitlement to damages; the only viable option to attempt to claw back funding is to apply for judicial review of the DfE's decision, on the basis that the decision is unlawful. Judicial review is the procedure by which one can seek to challenge the decision, action or failure to act of a public body such as a government department which exercises a public law function. Local authorities are not able to challenge the merits of the government’s decision to axe the BSF scheme, but can challenge the DfE as to whether it followed due process, whether the decision reached was ‘rational’ or whether it unlawfully breached the legitimate expectations of the local authorities.

Previous judicial review challenges have indicated that a full public consultation (to take place at a time where the proposals are still at the formative stage) should be undertaken where governmental departments are considering a new policy. Questions therefore arise as to whether the DfE should have consulted on the criteria for the overhaul of the BSF scheme and the way they in which those criteria were to be applied?

Further, in circumstances where the DfE has released four different lists of the schools to be axed (all containing mistakes), can it really be said that due consideration has been given to all of the material factors concerning why some schools got the chop and others escaped? Michael Gove has provided no reasoning on the mechanics of the decisions, other than to state that the BSF procurement process was generally overly wasteful and excessively bureaucratic. A local authority could argue that its individual circumstances were not taken into account, or that its situation should be regarded as exceptional.

Indeed, Sandwell MBC has already appointed lawyers in a bid to retrieve withdrawn funding worth £200m under a challenge to the lack of transparency in the decision making of the DfE. The Labour-run council, which believes the decision may be a political one, is to request sight of the criteria used by the DfE to decide which schemes would go ahead. In light of this, local authorities should consider the possibility of making a Freedom of Information Act request to obtain further information about the decision affecting it. That information is to be provided within 20 days of a request, so it should be borne in mind that this will use up a substantial portion of the three months’ limitation.

Another local authority, Nottingham City Council, is proposing initiating Judicial review proceedings under the doctrine of “legitimate expectation”, such that if a public body makes a clear and unambiguous promise, it is unlawful to break that promise unless there is a sufficient and overriding reason, which is in the public interest.

It is seeking advice on whether a letter it received at the beginning of the year from Partnerships for Schools, the body that administered BSF, amounts to a ‘robust promise of funding’ such that it is unlawful for that promise to be rescinded. Whether a legitimate expectation on the part of the Nottingham local authority has arisen (and whether it can be overridden) will depend on a number of factors including whether the words or conduct of the DfE which gave rise to the expectation were clear and unequivocal and whether it relied upon that promise to its detriment. If there has been a clear promise, how compelling are the grounds for breaking it? Certainly the DfE will argue that the cuts are in the overriding public interest, but this debateable as it is mooted that the costs incurred by the local authorities before learning that their projects were to be cancelled already eclipse and savings to be made.

Whilst the questions thrown up by Sandwell and Nottingham are food for thought, local authorities should not sit back await the outcome of those cases, as judicial review claims must be brought promptly and within three months of the decision complained of. The Courts do not look favourably on delay, so legal advice should be taken immediately if it is considered that there are grounds for bringing an application for Judicial review, or if an authority would like to use the threat of judicial review as a bargaining tool in discussions with the DfE. Of course, during these difficult financial times, paramount consideration will need to be given to the costs in bringing Judicial review proceedings before launching headlong into a claim.

It is certainly questionable whether the DfE properly understood the consequences of its decision but whether or not judicial review challenges are to have any success remains to be seen. Historically, the Courts have been reluctant to interfere with Government policy decisions, but the circumstances here are extraordinary and the sums involved are considerable. It is undoubtedly worth further thought for local authorities.

Rachel Cousins is a solicitor at law firm Weightmans LLP
Rachel.cousins@weightmans.com

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