Dudley Metropolitan Borough Council, R (on the application of) v Secretary of State for Communities and Local Government

A public authority may generally change its policy without consultation. However, procedural fairness may require consultation where a small, identifiable class has a pressing and focused interest in retaining a benefit previously enjoyed, and the new policy will be applied retrospectively to withdraw it. An abrupt withdrawal in those circumstances may amount to an abuse of power.

Consultation must occur while proposals remain formative, provide sufficient reasons and time for an intelligent response, and be conscientiously considered. A substantive expectation that a government policy will continue requires a sufficiently concrete commitment; annual public funding arrangements ordinarily do not bind successor governments. A financial decision with only contingent and indirect effects on protected groups may not engage the public sector equality duty at that stage.

Dudley Metropolitan Borough Council sought judicial review of the Secretary of State’s decision of 19 April 2011 to end declining-balance PFI grant payments and move the Council to an annuity-based system. The Council’s school ICT project had been funded on the declining-balance basis since 1999, and it had chosen to remain on that basis when the annuity system became available in 2004.

The Council challenged the decision on five grounds: procedural fairness and consultation; substantive legitimate expectation; rigid application of policy; error of fact; and breach of the public sector equality duty under Equality Act 2010, section 149. The central issues were whether consultation was required, whether the Council had a substantive expectation of continued funding, and whether the remaining public-law grounds were established.

1. Procedural fairness. The claim succeeded on this ground. One consultation exercise in 2004 did not establish a past practice giving rise to a legitimate expectation of consultation. However, a separate duty to act fairly arose from the Council’s expectation that its existing declining-balance funding would continue. The case concerned a small and identifiable class, and the impact of applying the new policy to the Council was pressing and focused. The decision would retrospectively withdraw an advantage previously enjoyed. Making it abruptly without consultation would therefore have been so unfair as to amount to an abuse of power.
2. The consultation was unlawful. The requirements identified in R v Brent London Borough Council, ex p. Gunning (1985) 84 LGR 168, and approved in R v North and East Devon Health Authority, ex p. Coughlan [2001] QB 213, required consultation while the proposal remained formative, sufficient reasons for an intelligent response, adequate time, and conscientious consideration of the responses. The January 2011 letter announced the decision in principle and invited representations only on mitigation. Later discussions therefore occurred after the material decision had been made.
3. Substantive expectation. The Council had no substantive legitimate expectation that declining-balance payments would continue indefinitely. Central government must retain a wide power to change policy in the public interest, particularly in relation to public finances. Annual grants and guidance stating only present intentions could not bind future governments for a possible period of 100 years or more.
4. Other grounds. The Secretary of State had considered whether to make an exception to the policy, so the policy had not been applied rigidly. Any initial factual error about the end of the project was corrected before the final decision. Section 149 of the Equality Act 2010 did not require consideration of the alleged impacts at that stage because they were contingent, indirect and potentially years in the future. The claim was granted only to the extent of the procedural-fairness ground.

First-instance judicial review proceedings. The judgment does not state any subsequent appellate history.