QUEEN'S BENCH DIVISION
London, WC2A 2LL
B e f o r e :
| The Queen on the application of: LIVERPOOL CITY COUNCIL
|- and -
|THE SECRETARY OF STATE FOR HEALTH
Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Nigel Giffin QC and Anya Proops (instructed by the Department of Health) for the Defendant
Crown Copyright ©
Mr Justice Stanley Burnton :
i) that the Secretary of State failed adequately to consult before making his Determination; and
ii) that his Determination was irrational.
The claim form includes an additional ground, namely that the Determination was inconsistent with LCC's legitimate expectation that it would receive a sufficient grant to meet all of its expenditure to which the grant relates. That ground was originally the principal ground put forward by LCC. The witness statement of Annie Sheppard, Executive Director at LCC, filed in support of its application for judicial review, stated:
"The essence of LCC's challenge to the Secretary of State is that he promised that the effect of the transfer would be cost neutral."
However, this claim based on legitimate expectation was abandoned by counsel for LCC during the hearing, in my judgment rightly, because there had been no relevant representation or promise made to it by the Secretary of State, and I need say no more about it.
The statutory background
"(1) The Secretary of State may, with the consent of the Treasury, pay grants to local authorities in England towards expenditure incurred by them in providing, or contributing to the provision of, such welfare services as may be determined by the Secretary of State.
(3) The amount of any grants under this section and the manner of their payment are to be such as may be determined by the Secretary of State or the [National] Assembly [for Wales](as the case may be).
(4) Grants under this section may be paid—
(a) to all local authorities,
(b) to particular local authorities, or
(c) to particular descriptions of local authority (including descriptions framed by reference to authorities in particular areas).
(5) Grants under this section may be paid on such terms and conditions as the Secretary of State or, as the case may be, the Assembly may determine; and nothing in subsection (6) affects the generality of this subsection.
(10) Any determination, guidance or directions under this section may make different provision in relation to different local authorities or descriptions of local authority (including descriptions framed by reference to authorities in particular areas).
(11) Before making any determination, issuing any guidance or giving any directions under this section relating to all local authorities in England or Wales or any description of such authorities, the Secretary of State or (as the case may be) the National Assembly for Wales must consult—
(a) such local authorities or representatives of local authorities as appear to him or it to be appropriate,
(b) such recipients, or representatives of recipients, of welfare services as appear to him or it to be appropriate, and
(c) such providers, or representatives of providers, of welfare services as appear to him or it to be appropriate.
(12) In this section—
"local authority" means—
(a) in relation to England, a county council, a district council, a London borough council, the Common Council of the City of London or the Council of the Isles of Scilly,
(b) in relation to Wales, a county council or a county borough council,
"welfare services" includes services which provide support, assistance, advice or counselling to individuals with particular needs."
"Up until March 1993, the great majority of people needing state funding to enter an independent sector residential or nursing home in Britain were in receipt of special higher levels of Income Support, a means tested benefit available from the Department of Social Security (DSS).
The state funding system changed fundamentally with the implementation in April 1993 of the community care reforms embodied in Part III and IV of the NHS and Community Care Act 1990. This transferred to local authorities the responsibility to make arrangements for people needing public financial support to enter residential and nursing homes from 1 April 1993, subject to both a means test and an assessment of need. However, Section 26A of the National Assistance Act 1948 (contained in Section 43 of the NHS and Community Care Act 1990) prohibited local authorities from making residential arrangements for people who were already resident in independent sector care homes on 31 March 1993.
The provisions of Section 26A and associated regulations are described in Local Authority Circular LA6. The effect has been to divide state-funded residents of independent sector care homes into two groups:
- Those entering homes for the first time on or after 1 April 1993, who look to local authority Social Service Departments (or in a minority of cases to the NHS) for assessment and financial support;
- Those who were 'ordinarily resident' in an independent sector care home on 31 March 1993, who have 'preserved rights' to special higher levels of Income Support; but whom local authorities are – with some exceptions – legally prohibited from supporting. This group includes care home residents who were paying their fees from private means on 31 March 1993 and who have subsequently run out of money.
There are four exceptions to the legal prohibition on local authorities providing financial support for people with preserved rights, set out in regulations (SI 477/1993). Their overall effect is to empower local authorities under the post-reforms regime to 'top-up' at their discretion the special higher levels of Income Support funding for people under pension age, in effect continuing the same pre-reforms powers local authorities had under the now repealed Schedule 8 to the NHS Act 1977.
In contrast, there are few circumstances in which local authorities are empowered to offer financial support to people over pension age with preserved rights."
[Italics in the original.]
The calculation of the grants
"In summary, taking 'distress' 3rd party top-ups and PEA (Personal Expenses Allowances) / disregarded capital users together, the state would on the face of it have to meet the shortfalls of 10,800 residents (a little over a quarter of all older preserved rights claimants, Figure 5) at a cost of some £9 million per annum (based on May 1999, reducing by about a third each year) in order to put the older preserved rights population on the same financial footing as the local authority funded population. It should be emphasised that the figure of £9 million must be regarded as an 'order of magnitude' estimate, based as it is on an informed guess on the frequency of 'distress' cases, where local authorities would have to bridge existing gaps between fees and preserved rights entitlements. The estimate is also sensitive to the average value of £75.00 attributed to weekly shortfalls in the 'open' class of '£65.01 and over'. However, the principal conclusions of this study do not hinge on the exact amount. If the scale of additional spending were viewed as a critical issue, then government has the option of commissioning a speedy research exercise in order to provide more reliable data."
"If the Government decides to implement these changes, we shall consult councils separately on the amounts to be transferred to them and the means of doing so."
i) in respect of the costs of local authorities in carrying out the assessments of the needs of the transferees; and
ii) in respect of additional top-up contributions that local authorities would have to meet, which previously had been met by relatives and other third parties.
The contributions referred to in sub-paragraph (ii) would meet the shortfalls referred to in the extract from the Rowntree report quoted in paragraph 9 above.
The calculation of the pot
I am attaching papers prepared by the Department of Health on the above on which I would be grateful for your views. You will know that the Association is not in a position to offer views on preferred options for distributing resources from central to local government but I would welcome your observations on the total amount of resources to be transferred and on any service implications arising from the distribution option.
The Department of Health has indicated that it would welcome commentary on these papers by the end of June. It would helpful, therefore, if I could here from you by Monday 25 June.
If you wish to send views on the distribution options per se direct to Brian Blagbrough at the Department of Health…it would be useful if you could also send a copy to us."
Mr Tree's email was copied to Brian Blagborough of the DoH, who was therefore able to see to whom it had been sent and copied.
"The objectives of the system for distributing the resources for preserved rights residents include:
- Fairness between local authorities;
- Smooth transition to the new arrangements such that no council suffers any effect on its ability to secure the rest of its business;
- Clarity and simplicity of approach."
"4. The transfer GB is estimated at £614 million for 2002/3 and £551 million for 2003/4. The England share of 86% is £528 million for 2002/3 and £474 million for 2003/4. DSS estimates that 43% of the 2002/3 transfer and 38% of the 2003/4 transfer relates to older people.
5. The technical assumptions used in estimating the transfer have turned out to be favourable to Social Services. …
6. The transfer will be supplemented by an additional sum of £100 million for Great Britain, or £86 million for England, in respect of the costs of assessment and the costs of the shortfall between care home fees and income support limits. It was not possible to produce a precise estimate of the shortfall. This is partly because of caveats surrounding the DSS data on fees met by preserved rights residents and partly because data are not available on local authority contributions to fees for younger residents. DSS data suggests that the shortfall for older residents is relatively small compared to the shortfall for younger residents.
8. The net effect of these financial arrangements are that local authorities will receive: -
For 2002/3: £214 million for older residents and £350 for younger residents, totalling £564 million for preserved rights residents;
For 2003/4: £175 million for older residents and £343 million for younger residents, totalling £518 million for preserved rights residents."
"9. The Department is not arguing that the 1.9% rise in the income support limits is directly covered by the minimum income guarantee (MIG). The issue is more complex.
10. The transfer was estimated using the best information available at the time. There have, however, been some changes since it was estimated. First, the income support limits are shortly to be raised by a further 1.9%. Second, the ordinary income support rates for older people (i.e. the MIG) were raised by substantially more than average earnings. Third, the date for the transfer of responsibilities will be 8 April rather than 1 April 2002.
11. If the transfer was to be reviewed, clearly all these changes would need to be taken into account. It would not seem right to consider only one of them. Although the further rise in income support limits would lead to a higher transfer, the substantial rise in the MIG and changed date for the transfer would lead to a lower transfer. Re-estimation of the transfer on updated assumptions, including the further increase in income support limits of 1.9% due in July 2001, would result in a net reduction in the overall transfer to local authorities.
12. Notwithstanding these comments, under the rules governing three-year Spending Review settlements, it is highly unlikely that the Treasury would allow the size of the transfer to be reopened at this stage."
"I understand that, following my e-mail communication…to colleagues representing the specific interests of unitary, metropolitan and county council social services authorities, the Department has received a number of responses indicating views on the options set out on those papers. I am sure that you will find these responses helpful when determining which of the distribution options to pursue.
I know that you will understand that given its nature as a voluntary membership organisation, the Association does not express views on matters relating to resources distribution mechanisms. Clearly, however, the Department will want to satisfy itself that its preferred distribution option maintains both stability in the care market, secures the least possible service disruption for local authorities and their client and takes account of cross authority funding and placement."
Most of the submissions related to the distribution of resources. The ADSS Resources Committee, however, expressed its "considerable concerns as to whether the amount available is adequate to the task required".
"108. It is common ground that, whether or not consultation of interested parties and the public is a legal requirement, if it is embarked upon it must be carried out properly. To be proper, consultation must be undertaken at a time when proposals are still at a formative stage; it must include sufficient reasons for particular proposals to allow those consulted to give intelligent consideration and an intelligent response; adequate time must be given for this purpose; and the product of consultation must be conscientiously taken into account when the ultimate decision is taken: R v Brent London Borough Council, Ex p Gunning (1985) 84 LGR 168."
i) that the manner of the calculation of the grant was irrational, i.e., it was liable to arrive at a sum that was an inaccurate and unreliable estimate of LCC's additional costs; and
ii) that, given the scope for error in the determination of the amount of the grant, it was irrational to determine a grant which did not provide for the reimbursement of LCC's costs resulting from the transfer or provide for supplementing the grant if LCC's actual costs during the year in question exceeded the costs predicted by the DoH.