Best value consultation – ignore it at your peril

We have been reminded recently that so much of what is happening in local government has its roots in the politics of the 1980s.

R (on the application of Nash) v Barnet London Borough Council [2013] EWHC 1067 (Admin)

We have been reminded recently that so much of what is happening in local government has its roots in the politics of the 1980s.  Two of those threads intertwined in the High Court at the end of April, but the outcome was trumped by a much older doctrine.

The case of R (on the application of Nash) v Barnet London Borough Council cleared the way for a £320 million outsourcing deal between Barnet and Capita, a key element of the Council’s ambitious and controversial “One Barnet” programme, and a second £290 million contract with Capita or EC Harris.  An affluent suburb with pockets of real deprivation, Barnet tends to be short changed in the local government finance settlement, and has always struggled to make ends meet.  Its response to the need to make vast savings has been a route march to outsource everything in sight. 

In Margaret Thatcher’s Government – she was a Barnet MP, of course – the Minister responsible for local government was Nicholas Ridley.  He famously postulated the minimalist local authority, meeting once a year to hand out contracts.  His spirit lives on.

The same government invented compulsory competitive tendering - CCT - obliging authorities to expose their activity to outside competition.  New Labour lost no time repealing CCT, but could not be seen to allow a return to old inefficiencies, so the Blair Government replaced it with “best value”, which included obligatory self-examination to ensure “comparison, consultation, competition and challenge”, and a frenzy of performance management.  This proved equally burdensome, so in 2007 the Brown Government lopped off the unpopular bits, replacing them with a new emphasis on community involvement. 

So section 3 of the Local Government Act 1999 contained a “best value duty” to “make arrangements to secure continuous improvement in the way in which [the authority’s] functions are exercised, having regard to a combination of economy, efficiency and effectiveness”.  And the Local Government and Public Involvement in Health Act 2007 added a new section 3A saying that if the authority considered it appropriate to involve representatives of local people then it should take the steps it thought appropriate to do so.  This is the “duty to involve”.  In April 2011 the incoming Coalition Government said it would repeal it, but it has not done so yet.  It is an innocuous, conditional and wordy statement of the obvious, so presumably there has been a feeling that it does not really matter.

But section 3 had, all along, contained another duty: a simple duty to consult rather than a convoluted duty to involve.  Section 3 says that to decide how to fulfil the best value duty, an authority must consult representatives of local tax payers of one sort or another, representatives of persons who use or are likely to use services provided by the authority, and representatives of persons appearing to the authority to have an interest in the area.

Since 2007, there have been hundreds of challenges to local authority decisions alleging failure to consult properly.  Strangely, section 3 has hardly made an appearance.  But it nearly scuppered Barnet.

Barnet had moved through a long process of policy development and procurement, culminating in the selection of contractors for two ten year outsourcing contracts covering customer services, estates, finance; human resources, information services, procurement, project management, revenue and benefits,  planning, building control, environmental health, trading standards and highways.  It had not consciously consulted anyone outside the council.  Ms Nash is a disabled service user, and is fearful of the impact of the decisions on the services she receives.  She applied for judicial review, principally on the ground of failure to consult, asking the court to set aside the recent decision to select Capita as the contractor for one of the contracts and to prevent a decision being taken on the other.

Barnet had consulted widely on its budget options, every year, but there were only obscure references to outsourcing.  They argued, though, that that was enough to satisfy section 3.

Underhill LJ was not persuaded.  He said that outsourcing was a way of discharging the duty to “make arrangements to secure continuous improvement”, and that Barnet had to consult people before deciding how to do so.  This doctrine should only apply to high-level decisions, and consultation need only address issues of principle.  Budget consultation was not enough, however, and there should be no difficulty identifying some “representatives” to consult.  There had been no section 3 consultation, and the decision was unlawful.

So far so good for Ms Nash.  Barnet would need to call time out, consult some representatives, take a further decision in principle and – if it had not changed its mind – try to pick up the pieces.   Barnet’s long march towards Ridley’s nirvana would have been interrupted by a previously overlooked sliver of the legislation that arose from the ashes of CCT.

But in came the cavalry: ancient warhorses with a venerable pedigree.  Vigilantibus non dormientibus æquitas subvenit – equity aids the vigilant, not those who sleep on their rights.   In judicial review proceedings, CPR 54.5 requires that the claim form must be filed promptly, and in any event not later than three months after the grounds to make the claim first arose, unless the Court exercises its discretion to extend time.  And under section 31 (6) of the Senior Courts Act 1981, the court may refuse to grant relief if it considers that there has been undue delay in making an application and that granting relief sought would be likely to cause substantial hardship to, or substantially prejudice the rights of, any person or would be detrimental to good administration.  When did the ground first arise, and had there been undue delay, with real adverse consequences? 

Underhill LJ started from the premise that the failure to consult occurred in 2010 and 2011 when Barnet decided to outsource and to start the procurement process for each contract.  The consultation duty attached to those policy decisions, not to their implementation.  Since then, Barnet had spent £4.5 million developing the projects, the partners were on the point of making a substantial investment, mainly in new IT, and savings of at least £14 million were anticipated in the first year.  The disruption, he said, would be enormous.  That was why there were time limits.

But he had to overcome the principle behind the House of Lords decision in R (Burkett) v Hammersmith and Fulham London Borough Council [2002] 1 WLR 1593, applied by the Court of Appeal in the “LAML” case, R (Risk Management Partners Ltd) v Brent London Borough Council [2010] PTSR 349.  In Burkett, the Council took a preliminary decision to authorise an officer to grant planning permission for a huge development scheme at Imperial Wharf, subject to the completion of a section 106 agreement securing planning gain, then later granted permission.  The House of Lords held that the claimant could have challenged the first decision, had she been in time, but that fresh grounds arose when planning permission was granted.  In LAML, Brent resolved in principle to take part in a multi-authority insurance mutual, and then later entered into a formal commitment.  The claimant, who had been denied the opportunity to compete for insurance provision, was too late to challenge the first decision, but the Court held that it could challenge the second.  Underhill J skipped clear of the Burkett principle.  He said that it applied if the earlier decision was “no more than a preliminary, or provisional, foreshadowing of the later decision”, but that, if this was not the case, making the second decision would not set time running again.  He acknowledged that the distinction was subtle.  In the present case, the decision to select the contractors was not, on its own, apt for obligatory consultation, it was too late to challenge the earlier decision, and on balance it was inappropriate for him to exercise his discretion to extend time.  

There may be an appeal.  Neither issue is clear cut.  Leaving aside the semantics (always dangerous in the Court of Appeal, mind you) there is a clear argument that both the section 3 duties are so-called “target duties”, satisfied if the authority seeks best value and consults generally.  And the delay point is highly subjective.  Judges at first instance should be wary of limiting decisions of the House of Lords.  Underhill LJ felt that Barnet’s earlier statements that there would be community engagement in developing One Barnet did not outweigh the need for a timely challenge, bearing in mind the scale of the disruption that a setback would cause, but a different court could come to a different conclusion.  In the current climate, the courts are reining back their natural inclination to interfere with money-saving local authority initiatives.  Underhill LJ was appointed to the Court of Appeal shortly before this decision was handed down, so his views will be respected.  There was a two year interval between the decisions to press ahead with procurement and the selection of the contractor, and the delay was substantial, but Ms Nash’s decision may depend more on whether her legal aid funding would extend to an appeal, and local politics.

The lesson for local authorities is clear.  Barnet were lucky.  If Ms Nash had started her proceedings in September 2011, she would probably have succeeded in interrupting the process.  Local authorities contemplating outsourcing, joint ventures, large-scale shared services arrangements and the like will need to find some representatives of local service users, and of people with an interest in the area, and consult them on their proposals, before deciding to press forward.   Note in particular the reference to representatives.  Underhill LJ said that general public consultation on the authority’s website is different, and will not be sufficient.  Local authorities will need to build the selection of representatives, and a consultation process, into their policy development process, and those whose plans are well advanced may need to take a step back.

Graeme Creer
Consultant
Weightmans LLP

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