UKSC 56
On appeal from:  EWCA Civ 116
LORD WILSON (with whom Lord Kerr agrees)
The Surrounding Facts
"(1) Before making a scheme, the 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
(c) consult such other persons as it considers are likely to have an interest in the operation of the scheme.
(3) Having made a scheme, the authority must publish it in such manner as the authority thinks fit.
(4) The Secretary of State may make regulations about the procedure for preparing a scheme."
The title of the paragraph puts beyond doubt that the procedure for preparing a scheme, which can be the subject of regulations under subparagraph (4), includes the procedure for the consultation required by subparagraph (1)(c). In the event, however, no such regulations were made. Paragraph 4 of the schedule required the Secretary of State to prescribe a "default scheme" so as to provide for relief from council tax in and after 2013-2014 for households in the area of any local authority which had failed to make a scheme by 31 January 2013. The default scheme, set out in the Council Tax Reduction Schemes (Default Scheme) (England) Regulations, SI 2012/2886, provided that, notwithstanding the reduction in reimbursement by central government, a local authority should grant relief against council tax after 1 April 2013 at the same level as had previously been granted by way of CTB. Paragraph 5 of the schedule provides that, for each year subsequent to 2013-2014, a local authority must consider whether to revise its CTRS and that, if it resolves to do so, it should again comply with the provisions for preparation of a scheme in paragraph 3.
"Needless to say it is my belief that this represents one of the most appalling policies of the government and it is not insignificant that the unemployed will now be facing the prospect of having to pay 20% local taxation levels, which they last were subjected to paying under the Poll Tax."
There was nothing wrong with Councillor Goldberg's expression of indignation. But it did betray an assumption that the shortfall would have to be reflected by provisions in the CTRS which reduced the level of relief below the level previously provided by way of CTB rather than that Haringey should absorb it in other ways. It is true that in the body of the report Mr Ellicott proceeded to refer to the option of absorbing the cost and then rejected it on the ground that it would require a reduction in services. He also identified, and rejected, options for exempting each of four classes of claimant for relief from any reduction below its existing level. In the end he recommended 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, of course, to pensioners; and that, because pensioners would not be meeting their share, the percentage reduction for other claimants would have to rise to between 18% and 22%. Those who were then in receipt of full CTB, other than pensioners, would therefore, for example, be required to pay between 18% and 22% of their council tax liability.
(a) that the effect of the default CTRS would be to leave Haringey with a shortfall of £3.846m;
(b) that adoption of a CTRS which complied with the TGS criteria would leave Haringey with a net shortfall of £1.489m;
(c) that in the light, among other things, of responses to the consultation exercise, it would be appropriate for the disabled to join pensioners as the two groups exempt from reduction in support below current CTB levels; and
(d) that, in the light of (c) above and of clarification by central government of the precise amount to be paid by it in respect of council tax reduction in 2013-2014, Haringey's CTRS should provide for a reduction of relief below current CTB levels of 19.8% across the board other than for those two groups; and that, subject to difficulties of collection, such a reduction would render Haringey not out of pocket as a result of the move from CTB to a CTRS.
"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.
The attached booklet provides all the information you need to understand the changes the Government are making. It sets out the proposed Council Tax Reduction Scheme and explains how this is likely to affect you. Please read this information carefully.
We want to know what you think of these proposals before reaching a final decision about the scheme we adopt. Once you have looked at the information please complete the attached questionnaire and return it in the FREEPOST envelope by 19th November 2012. Be heard – have your say."
For present purposes the importance of Mr Ellicott's letter surrounds the paragraph of it which he chose to print in bold. Note its opening words, namely "This means that…". Mr Ellicott was there stating that the shortfall in government funding meant that Haringey's CTRS would provide less relief against council tax than recipients of the letter, other than pensioners, were receiving by way of CTB. But the shortfall did not necessarily have that consequence. Why was Mr Ellicott not there recognising that at least there were other options, albeit not favoured by Haringey, for meeting the shortfall? Note also Mr Ellicott's use of the indefinite article, in his reference to "the introduction of a local [CTRS] in Haringey". It suggests that any CTRS introduced in Haringey, not just the scheme proposed, would need to meet the shortfall by a reduction from existing levels of CTB.
"Early estimates suggest that the cut will leave Haringey with an actual shortfall in funding of around 20%. This means Haringey claimants will lose on average approximately £1 in every £5 of support they currently receive in [CTB]. " [Italics supplied]
There is no doubt that Haringey's proposed scheme meant that its claimants would suffer a loss of that order. But the reduction in government funding did not inevitably have that effect. Then, under the subheading "What's changing?", Haringey, adopting almost the same terms as those in Mr Ellicott's letter, said:
"At present the Government gives us the money we need to fund [CTB] in Haringey. From next April we must implement a new [CTRS]. We'll 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 next year and this could rise in later years.
Although pensioners will move on to the new [CTRS], they will receive the same amount of support they would have received under the current [CTB] regulations.
That means that the introduction of a local [CTRS] in Haringey will directly affect the assistance provided to everyone below pensionable age that currently receives [CTB]." [Italics supplied]
In the consultation document there was 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.
"We also have to decide if certain groups should be protected from any changes we make and continue to get the same level of support as they do now. Doing this would mean that other claimants would get even less support."
"To what extent do you agree we should apply the Government's reduction in funding equally to all recipients of working age?
This means that every household of working age will have to pay something towards their council tax bill."
I consider, contrary to Haringey's contention, that the reader of the first question was 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. The gist of the first question was in my view whether, upon that assumption, all such recipients should suffer the reduction in equal proportions. The fifth question, again cast upon that assumption, presented the alternative possibility as follows:
"Should some groups of people continue to get the same support as now even if doing this would mean that other claimants would get less support?"
A reader who answered "Yes" to the fifth question was then offered a box in which to identify the groups whom he or she considered should be protected. The second, third and fourth questions related to other, less significant, departures from CTB rules proposed in Haringey's draft CTRS. Following the five main questions there was a second box, above which Haringey wrote:
"Please use the space below to make any other comments about our draft Council Tax Reduction Scheme."
"I write to oppose your proposals on the grounds that the 25,560 households who now pay no council tax will not be able to pay 20%, or around £300 pa, from April 2013…[B]enefits are paid… to our poorest fellow citizens to provide the necessities of life; they are already inadequate…"
On 6 November 2012 Haringey responded:
"We have asked for comments around protecting groups in addition to Pensioners, however protecting additional groups will have an impact on the remaining recipients who will have to pay a higher amount to cover the shortfall. Your email below is unclear as to which group you are suggesting we protect and how we then make up the shortfall."
In his response dated 7 November 2012 The Rev. Nicolson observed:
"I am aware that central government has cut its council tax benefit grant to… Haringey and all other councils by 10%. Other councils are absorbing the cut and continuing [to] implement the current CT benefit scheme. Why cannot Haringey do the same? There is no consultation taking place about that central issue."
On 10 December 2012, following the end of the consultation, The Rev. Nicolson wrote a letter of protest to the Leader of Haringey Council, which ended as follows:
"I am shocked that no alternative to hitting the fragile incomes of the poorest residents of Haringey … was included in the recent consultation."
"Mr Sedley submits that these basic requirements are essential if the consultation process is to have a sensible content. First, that consultation must be at a time when proposals are still at a formative stage. Second, that the proposer must give sufficient reasons for any proposal to permit of intelligent consideration and response. Third,… that adequate time must be given for consideration and response and, finally, fourth, that the product of consultation must be conscientiously taken into account in finalising any statutory proposals."
Clearly Hodgson J accepted Mr Sedley's submission. It is hard to see how any of his four suggested requirements could be rejected or indeed improved. The Court of Appeal expressly endorsed them, first in the Baker case, cited above (see pp 91 and 87), and then in R v North and East Devon Health Authority, ex parte Coughlan  QB 213 at para 108. In the Coughlan case, which concerned the closure of a home for the disabled, the Court of Appeal, in a judgment delivered by Lord Woolf MR, elaborated at para 112:
"It has to be remembered that consultation is not litigation: the consulting authority is not required to publicise every submission it receives or (absent some statutory obligation) to disclose all its advice. 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. The obligation, although it may be quite onerous, goes no further than this."
The time has come for this court also to endorse the Sedley criteria. They are, as the Court of Appeal said in R (Royal Brompton and Harefield NHS Foundation Trust) v Joint Committee of Primary Care Trusts  EWCA Civ 472, 126 BMLR 134, at para 9, "a prescription for fairness".
Application of the law to the facts
"In this statutory context fairness does not require the Council in the consultation process to mention other options which it has decided not to incorporate into its published draft scheme; much less does fairness require that the consultation document contain an explanation as to why those options were not incorporated in the draft scheme."
Pitchford LJ, by contrast, agreed with Underhill J who, at para 27, had concluded that:
"consulting about a proposal does inevitably involve inviting and considering views about possible alternatives."
It is clear to me that the latter conclusion is correct. It is substantially in accordance with the decisions in the Gateshead and the Royal Brompton cases referred to in para 28 above. Those whom Haringey was primarily consulting were the most economically disadvantaged of its residents. Their income was already at a basic level and the effect of Haringey's proposed scheme would be to reduce it even below that level and thus in all likelihood to cause real hardship, while sparing its more prosperous residents from making any contribution to the shortfall in government funding. Fairness demanded that in the consultation document brief reference should be made to other ways of absorbing the shortfall and to the reasons why (unlike 58% of local authorities in England: see para 15 above) Haringey had concluded that they were unacceptable. The protest of The Rev. Nicolson in his letter dated 10 December 2012 was well-directed.
"We could decide to provide support at the same level as Council Tax Benefit, but this would mean
- raising Council Tax in the region of 4.4%;
- reducing Council services and using the compensatory savings to fund Council Tax Support; or
- a combination of [the two].
[But] we already have to plan the Council's finances on the basis that there may be a rise in Council Tax of around 1.9% and that all service areas will have to make savings this year."
Part of Birmingham's first question was:
"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?"
Birmingham's presentation was fair.
LADY HALE AND LORD CLARKE