Essex County Council v Secretary of State for Education

The claimant challenged the Secretary of State's reduction of carry‑forward capital grant (End Year Flexibility) on three grounds: lack of consultation about the criteria for deciding which projects were "committed", irrationality in the selection of the criterion (treating expenditure as committed only where a building contract had been signed) and failure to fulfil duties under the relevant equality legislation. The court rejected the challenges on consultation and irrationality. The judge found that the Secretary of State had not properly had "due regard" to duties under the Race Relations Act 1976 (section 71(1)) and the Disability Discrimination Act 1995 (section 49A(1)) and so had failed to discharge equality duties. The remedy was limited: the decision was quashed and remitted for reconsideration solely so as to enable the Secretary of State to comply with his equality duties (now under the Equality Act 2010), without reopening or reconsidering other issues unless required by that equality reconsideration. The claimant was awarded 50% of its costs.

This judicial review concerned the Department for Children, Schools and Families' (later Department for Education) decision to reduce local authorities' carry‑forward capital grants for 2010–11 and the criteria used to determine which local projects were to be treated as contractually committed and therefore protected from the cuts. Essex County Council sought relief challenging the decision on three grounds: (i) failure to consult about the definition of "committed" expenditure; (ii) irrationality in adopting a criterion that treated only projects with signed building contracts as committed; and (iii) breach of statutory equality duties.

Background and facts:

• Central government announced three-year allocations of capital grant and allowed carry‑forward subject to audited statements. In 2010 the Department sought savings in End Year Flexibility (EYF) due to budget cuts.
• Officials and architectural advisers adopted a practical definition of "committed" expenditure tied to the existence of a signed building contract (or order for a capital asset).
• Essex had entered into contracts with providers (primary schools and nurseries) under arrangements often described as "passporting" funds to providers; most such contracts were entered into before 7 July 2010 but, as officials and advisers initially understood, did not necessarily include signed building contracts with constructors.
• The Department reduced Essex's carry‑forward by £12.9 million, accepting only £2.2 million of Essex's proposed changes. Essex nonetheless completed many projects after the decision and argued it suffered loss of grant.

Procedural posture and relief sought: Essex challenged the decision by judicial review seeking quashing of the decision and associated relief. The issues litigated were consultation, irrationality and compliance with equality duties.

Court's reasoning:

• Consultation: The judge held there was no legal obligation to consult specifically about the internal criterion for what constituted "committed" expenditure. Past contacts between Essex and departmental advisers about projects did not give rise to a focused procedural expectation requiring consultation about the criterion.
• Irrationality: The selection of the building‑contract criterion was rationally connected to the legitimate objective of saving public funds quickly. Once the Department became aware of Essex's contractual arrangements and obtained legal advice indicating Essex could withdraw from many of those contracts without significant penalty, the criterion remained a reasonable choice.
• Equality duties: The judge applied the "Brown" principles and concluded that the Secretary of State and his officials had not given the requisite rigorous, recorded and substantive consideration to the duties under section 71(1) Race Relations Act 1976 and section 49A(1) Disability Discrimination Act 1995. The failure meant the decision was unlawful in that respect.

Remedy: The decision was quashed but only in so far as it failed to comply with equality duties. The court ordered the Secretary of State to remake the decision in light of the Equality Act 2010 duties; he need not reopen other issues unless required by consideration of equality obligations. Costs were awarded to the claimant at 50%.

The claim succeeded in part. The court dismissed the challenges based on lack of consultation and irrationality but found a failure to comply with statutory equality duties under section 71(1) of the Race Relations Act 1976 and section 49A(1) of the Disability Discrimination Act 1995. The Secretary of State's decision was quashed and remitted for reconsideration limited to giving proper effect to the equality duty (now under the Equality Act 2010); other aspects need not be reopened except insofar as the equality reconsideration requires.