Back to school for Education Secretary

On 11 February 2011 the High Court handed down judgment in the Building Schools for the Future judicial review. This was a challenge to the controversial decision of Michael Gove, Secretary of State for Education, to cancel funding for the Building Schools for the Future scheme.

Bevan Brittan LLP acted for Sandwell MBC, one of the six local authorities that challenged the decision. The councils succeeded in their claim and costs were awarded against the Secretary of State.

In this article we look at what the judgment means for the councils affected and for public bodies in the future making difficult decisions about spending.

Background

The national Building Schools for the Future (BSF) programme was launched in 2003 and aimed over a 15 year period to rebuild or refurbish every secondary school in England. Before coming to power the Conservative Party, and Mr Gove in particular, criticised the project as being unnecessarily bureaucratic and wasteful. In the week after its formation, the new Coalition Government announced the need to deliver £6bn in savings in 2010-2011 and to stop immediately any funding approvals made since the beginning of the year which were either not affordable or not consistent with the new Government’s priorities. It was widely understood that the BSF programme would, in some way, be affected by the cuts.

On 5 July 2010 Mr Gove made a statement on education funding to the House of  Commons and announced that, other than those BSF school projects specifically listed as being “saved”, any future capital commitments would have to wait until the conclusion of the Government’s review of capital expenditure, effectively ending the BSF programme. Mr Gove did say that he would take into account contractual commitments already entered into. In the ensuing debate there appeared to be some confusion over which schools were and were not affected and this confusion was not eradicated by the list of schools which was placed in the House of Commons library that day. Errors were contained on the list: most notably Sandwell’s schools were all listed as unaffected whereas in fact the funding for all nine of Sandwell’s schools had been stopped.

As the days went by the level of confusion did not dissipate. At first there was no reference to what would happen to councils which had schools to be delivered in a repeat wave of investment, there was only reference to schemes which had reached financial close and those which had not. It slowly emerged that for councils with repeat waves of funding, the repeat waves would not be allowed to continue if they had not got “Outline Business Case” approval before 1 January 2010. The stopped schools for all of the councils challenging this decision were in a repeat wave of funding, and none of those councils had reached Outline Business Case approval stage by 1 January 2010.

What were the grounds for challenge?

• Legitimate expectation: The claimants argued that the Secretary of State had failed to take account of substantive legitimate expectations that funding would be granted. Although the BSF project documentation stated that funding was not guaranteed until a promissory note was received, it was argued by the claimants that the fact that they were encouraged to set up Local Education Partnerships (“LEPs”) and incur costs (and potential liabilities), created a legitimate expectation that, so long as the authorities stuck to their side of the bargain, the Government would do the same. The court accepted that public bodies enjoyed a wide discretion to change policies, and held that the Outline Business Case approval did not create a legitimate expectation that any given project would proceed.
• Irrationality: When the decision was first announced, the “financial close” date of the LEP procurement appeared to be the criterion Mr Gove used to decide which schemes should continue and which should stop. However, all of the claimants had reached financial close with their LEP and the argument was that Mr Gove’s  decision was irrational because the basis on which it was made was not fully understood by him. The use of 1 January 2010 as the cut-off date and the rules-based approach adopted by the Secretary of State were also challenged on the ground of irrationality. The court held, however, that the decision was not open to challenge on a discrete rationality ground. The decision was a political and macroeconomic one. If the Secretary of State had acted irrationally, that should be apparent without detailed enquiry, which, the judge found, was not the case here. The court was satisfied that the Secretary of State and his officials were not confused. 
• Fettering of discretion: The Secretary of State admitted in his evidence that he adopted strict rules-based criteria. There would be “winners” and “losers” as a  result of his decision, and he did not want to have to arbitrate between individual authorities or schools. He chose a rationale and he applied it strictly, admitting only few exceptions to his rule (specifically, sample schools in first wave schemes and Academies). The court held that the Secretary of State, even if making a one-off decision as opposed to creating a policy, had a duty not to fetter his discretion so as to preclude individual consideration of individual cases. The rules had been applied in an unlawful, hard-edged way. 
• Lack of consultation: The claimants argued that there was a procedural legitimate expectation that, where the local authorities had been encouraged to pursue a particular path in the BSF programme (including establishing LEPs, tendering with contractors and incurring costs and potential liabilities), provided the authorities followed the steps that they had been told to, they would at least be consulted in a meaningful way before the Government decided that the path would no longer result in the funding the authorities expected. There had been no consultation with the authorities prior to the announcement being made. The court held that the BSF process had involved continuous and intense dialogue between the Department for Education and the local authorities, who, right up to the date of the decision, were acting and spending in reliance on that. The way in which the Secretary of State abruptly stopped the claimants’ projects without any prior consultation with them, was so unfair as to amount to an abuse of power. There was no overriding public interest that precluded any consultation or justified the lack of consultation.
• Equalities Act duty: All public bodies have a statutory duty to have due regard to equality issues. The Minister for Women and Equalities, Theresa May, had written to all Cabinet Ministers on 9 June 2010 reminding them of the need to have due regard during the context of the budget cuts. No equalities impact assessment was carried out prior to the decision being made to cut the funding. One was carried out after the decision and it showed that the decision to cut the funding would in fact have a disproportionate effect on disabled pupils and pupils with English as a second language. The Secretary of State commented, however, that even upon receipt of this, that factor did not change his mind. The court adopted the principles set out in the case of R (Brown) v Secretary of State for Work and Pensions (2008) and held that the duty to have due regard must be carried out before and at the time that the decision is taken, in substance, with rigour and with an open mind. The Secretary of State seemed to have had no regard to relevant duties at all, let along rigorous regard.

Conclusion on the points of law

This case is important because it underlines  that public bodies making difficult decisions about cuts have to consider the impact of those cuts on those who will be affected by them. Contrary to what some commentators have said (including Michael Howard on the Radio 4 Today programme on the first morning of the trial), the courts are reluctant to interfere with discretionary decisions other than where there has been manifest error. Courts recognise that they do not have access to the full background which should equip those decision-makers to take the decision. Equally, however, the courts protect the rights of those who might be affected by the decision by ensuring that decision makers reach their decisions in a manner which is lawful.

So what could Mr Gove have done differently?

None of the claimants was saying that Mr Gove did not have the power or authority to make the cuts in question. It was recognised that savings had to be made and a balancing exercise had to be carried out. The claimants were all deprived boroughs with schools in various stages of dilapidation. The proposed cuts would have had a disproportionate effect on already disadvantaged pupils. Further, the authorities had incurred significant liabilities and costs in setting up LEPs to deliver projects. If the  funding was stopped, that expenditure would be wasted. It would have been possible for Mr Gove to have run a short consultation period during which these different factors could have been weighed up, and perhaps ways of delivering the projects on a cheaper basis could have been explored rather than stopping them altogether.

What next for the BSF Claimants?

The Secretary of State’s decisions to cut funding for the claimants’ schools was quashed. He must now take his decision again, with an open mind, and this time he must consult with the claimant authorities and have due regard to equalities impact.