Care North East Newcastle, R (on the application of) v Newcastle City Council

A local authority setting care-home rates must have due regard to the actual costs of providing care and relevant local factors. It may take affordability and resource allocation into account, but its assessment must be evidence-based and rational. A model used to inform the decision must not be materially distorted by unsupported assumptions about inflation, efficiency savings or return on equity.

Where consultation is undertaken, consultees must receive sufficient information about the proposals and reasons to make an intelligent response, and their views must be conscientiously considered. A local authority may not use its market position to make new placements conditional on providers accepting enforced discounts below the usual rate.

The claimants, members of an association representing care-home providers, challenged Newcastle City Council’s decision of 26 March 2012 fixing the rates payable for publicly funded care-home placements in 2012–13. They alleged that the Council had failed to investigate the actual costs of care, had acted irrationally and disregarded relevant considerations, had conducted an inadequate consultation, and had unlawfully imposed discounted contractual rates as a condition of receiving new placements.

The central issues were whether the Council had complied with its statutory duties and relevant guidance when modelling and fixing its usual rates, whether the consultation was legally sufficient, and whether its contractual approach was consistent with the National Assistance Act 1948 (Choice of Accommodation) Directions 1992.

1. Grounds one and two. The claim succeeded. The Council was required to have due regard to the actual costs of providing care and other local factors. Affordability remained relevant, and the court would be slow to interfere with a properly informed allocation of scarce resources. However, once the Council relied substantially on the PWC model to ascertain the actual cost of care, alterations to that model required objective justification.
2. The assumptions used were not adequately justified. The inflation figures appeared to have been selected without a relevant statistical basis. The further 2% efficiency deduction lacked objective evidence that the efficiencies could be achieved, particularly when provider-specific discounts had already been negotiated. The effective removal or near-removal of return on equity was also inadequately reasoned and failed to address the sustainability of the care-home market. The Council therefore failed to inform itself of the actual costs and acted irrationally or failed to take relevant considerations into account.
3. Ground three. The consultation was unlawful. Applying the principles in R v North and East Devon HA, ex p Coughlan [2001] QB 213, consultation had to occur while proposals remained formative, provide sufficient reasons for an intelligent response, allow adequate time, and ensure conscientious consideration of the responses. The providers were not adequately informed that no general increase was proposed, that return on equity would effectively be stripped out, or of the reasons for those proposals. Their views were also inaccurately reported to decision-makers.
4. Ground four. The Council could accept a freely negotiated discount, but it could not refuse new placements solely because a provider declined an enforced discount below the usual rate. The Directions contemplated a usual rate and did not permit an additional obstacle where the provider did not seek more than that rate. The Council’s conduct abused its dominant market position and conflicted with the relevant guidance.
5. The court exercised its remedial discretion despite delay and the possible impact on the Council’s budget. The rate-setting decision was declared unlawful and quashed. The Council was also declared unable to refuse placements on the basis that providers declined discounted rates without agreement. The rate decision was to be reconsidered.