Business rates – Government incentive scheme – Local authorities receiving grants rewarding increased receipts of business rates – Scheme awarding grants by reference to growth in rates – Changes during year resulting in increases and decreases in business rates – Claimant authorities seeking judicial review of determination by defendant secretary of state – Whether claimants having legitimate expectation that determination to take account of fluctuations in business rates – Application dismissed
The defendant secretary of state devised the Local Authority Business Growth Incentives scheme (LABGI), under which local authorities were to receive grants as a reward for increasing receipts of business rates in their area. Grants were to be payable where the annual growth in receipts exceeded a fixed target.
The defendant announced that a single payment would be made to each of the claimants, in the final quarter of each financial year, to reflect the increase in the claimant’s rateable value during the previous calendar year. The increase in rateable value would be assessed by reference to actual changes to rateable values as provided by the Valuation Office Agency (VOA). The defendant stated 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.
In determining the grants for 2005, the defendant fixed the entitlement of the claimants at nil, despite their claims to have secured significant growth in business rates in that year. The reason for the nil payment was that the data provided by the VOA covered only those properties that had undergone a change in rateable value by one of four means, or “change codes”. A decision had been made to exclude those attributable to expansions or contractions of existing hereditaments, since change code 20, under which such alterations, fell did not distinguish changes that resulted from recent successful rating appeals.
The claimants successfully challenged the defendant’s determination by way of judicial review on the basis that the defendant had acted to defeat the claimants’ legitimate expectation as to how growth during the first calendar year should be calculated and rewarded: see R (on the application of Corby Borough Council) v Secretary of State of Communities and Local Government; R (on the application of Slough Borough Council) v Secretary of State for Communities and Local Government [2007] EWHC 1873 (Admin), [2007] 33 EG 91 (CS).
Following the second year’s determination in February 2007, the claimants again applied for judicial review. They argued that the defendant had failed to take account of the code 20 growth as required by the published scheme and in accordance with the earlier judgment and in the light of two subsequent technical documents addressing the scheme.
Held: The application was dismissed.
In all the circumstances, the claimants were no longer entitled legitimately to expect that code 20 growth would be included in the 2007 determination. Neither the technical paper of July 2006 nor the review of September 2006 relating to year two indicated that the scheme was to change with regard to code 20 growth. Both documents reflected what, until the High Court judgment of July 2007, had been thought by the defendant to be an acceptable approach to code 20 growth.
The important question was whether, in the face of both of documents, any council could legitimately have expected that code 20 growth would be included in the defendant’s calculations for year two. The claimants knew that the defendant had a wide discretion in respect of the amount of grant to be paid and that the scheme was subject to review after the first year’s determination. The review document indicated in clear and unequivocal terms that it was dealing with what would happen in year two. A sensible and reasonable reading of the documents as a whole led to the conclusion that code 20 growth would not be included in the scheme for year two.
In any event, the defendant had an overriding and proportionate reason to defeat any substantive legitimate expectation that the claimants might have had as regards code 20 and the starting valuation for years two and three. Adding in cumulative code 20 growth would distort the effect of the scheme and there would be practical difficulties in now following it. Although policy was a significant factor in the defendant’s decision, she had taken all relevant considerations into account and the decision was neither inconsistent nor irrational.
Philip Coppel (instructed by the legal departments of Slough Borough Council and Corby Borough Council) appeared for the claimants; Clive Sheldon (instructed by the Treasury Solicitor) appeared for the defendant.
Eileen O’Grady, barrister
