What made the Supreme Court rule in favour of the six councils arguing that the Building Schools for the Future cancellation was unlawful? Adrian Turner examines the legalities and implications for government policy
When education secretary, Michael Gove, decided to axe the previous government’s Building Schools for the Future (BSF) programme, shortly after the coalition came to power, there was considerable disquiet. Six local authorities decided they were not going to take the decision without a fight and, as a result, a judicial review challenge got under way.
Given the very large number of schools involved in BSF, there was a long pipeline for projects, and applications for funding went through a lengthy series of stages of approval, run by Partnership for Schools.
Looking at BSF in the context of the Whitehall-wide spending cuts made by the Government, Mr Gove said that where ‘financial close’ had been reached in a local education partnership (LEP), the projects agreed under that LEP would proceed. So, if a project had obtained outline business case (OBC) approval by 1 January 2010, it would proceed. If it obtained OBC approval after 1 January 2010, it would not.
Essentially, the claimants in this particular case obtained their OBC approval after 1 January 2010 and therefore, funding for their projects was cancelled after they had incurred considerable expense in promoting their schemes.
Even though full business case (FBC) approval had not been granted, one local authority was only a few weeks away from starting construction work on the project when the minister announced his decision – which applies only to the projects involved in this particular challenge, and does not apply to other, cancelled BSF projects.
It does not mean that the cancellation of most of the wider BSF programme was unlawful, or that there was any duty to consult before taking the decision, in principle, to scrap the BSF programme.
Although the court’s judgement relates only to specific schools projects which were the subject of the challenge, it usefully illustrates how the courts may approach politically-controversial government decisions to make cuts, subject to the point that decisions in such cases are highly fact-sensitive. It shows that in certain circumstances, public bodies implementing cuts, may be required to consult affected parties before taking such decisions, and that such bodies must have regard to the ‘equalities’ impact of any such decisions before they are made.
In this case, the claimants challenged the secretary of state’s decision on multiple grounds, but succeeded on only two. The claimants argued that although there was no contractual commitment to fund the projects, there were both a substantive legitimate expectation that funding would be provided, and a procedural legitimate expectation that they would be consulted before a decision was made to cancel the funding. The judge decided that on the facts of the particular cases, the OBC approval did not amount to a promise or undertaking that funding for the projects would be provided.
The wording of the OBC did not amount to a clear and unambiguous promise, commitment or undertaking which was capable of creating a legitimate expectation, binding in law, that the funding would be provided, even though it was submitted by the local authorities that there had never been a single instance where OBC approval had been given and FBC approval had not later followed.
However, the judge decided that there was a procedural legitimate expectation that the claimants would be consulted in advance about the decision to cancel funding for their projects. He was careful to say he was not suggesting that Mr Gove was required to consult the claimants before taking the overarching decision to scrap BSF.
However, the fact that the local authorities had incurred very substantial expenditure in preparing for the projects meant that the decision that they would not be funded could not lawfully be made without some prior consultation, even if there is only a consultation period of a few weeks.
The judge held that the way in which the secretary of state abruptly stopped the projects in relation to which OBC approval had already been given, without any prior consultation, ‘must be characterised as being so unfair as to amount to an abuse of power’. He added that ‘however pressing the economic problems, there was no “overriding public interest” which precluded any consultation or justifies the lack of any consultation’. Accordingly, the decision-making process followed in relation to the six local authorities was unlawful.
As a result of these findings, Mr Gove has been ordered to reconsider his decisions in relation to the specific projects involved in the challenge, having allowed each of the authorities a reasonable opportunity to make representations and rigorously discharging his equalities duties.
Although one local authority sought an order that it be compensated for its lost costs and liabilities, the judge considered any such decision would be premature.
This decision demonstrates that, depending on the facts, state bodies may have a duty to consult those affected before deciding to implement major cuts. In exercising their functions, public bodies must have due regard to their statutory equalities duties, and ensure there is a clear record that they have had regard to those duties as part of their decision-making process.
This judgement is likely to be studied closely by all those affected by the continuing implementation of the CSR. Interestingly, similar issues were also raised in the recent London boroughs grants case Hajrula v London Councils, both in terms of consultation and equalities.
Adrian Turner is partner in the project and infrastructure finance group at international law firm, Eversheds