Rotherham Borough Council & Ors, R (On the Application Of) v Secretary of State for Business, Innovation And Skills

The claimants sought judicial review of two decisions by the Secretary of State allocating the United Kingdom's share of EU Structural Funds for 2014–2020. The central legal issues were whether the Secretary of State breached the EU law principles of equal treatment and proportionality in the allocation between regions, and whether he failed to take into account a mandatory relevant consideration (the relative economic needs of Transition regions). The Court of Appeal held that proportionality added nothing over a rationality review where there was no derogation from a specific legal standard, that a wide margin of discretion applied to political and economic allocation decisions, and that the Secretary of State had not acted irrationally or unlawfully in applying a common 2013 baseline to English Transition regions. The court agreed with the High Court's overall approach and dismissed the appeal.

Background and parties. The claimants were local authorities representing the Merseyside and South Yorkshire NUTS 2 regions. They challenged two UK decisions about the split of EU Structural Funds (ERDF and ESF) for 2014–20: (1) the UK distribution between England, Scotland, Wales and Northern Ireland and (2) the detailed allocations within England by Local Enterprise Partnership areas.

Nature of the claim and relief sought. The claimants sought judicial review of the two decisions on EU law grounds (breaches of equal treatment and proportionality) and on domestic public law grounds (failure to take into account mandatory considerations). They argued the combined effect of the decisions produced disproportionately large cuts for Merseyside and South Yorkshire compared with similarly placed regions (Highlands & Islands and Northern Ireland).

Issues framed by the court.

• Whether the proportionality principle required a more exacting review of the allocation decisions, and, if so, the appropriate standard.
• Whether the Secretary of State breached the EU principle of equal treatment by treating Merseyside and South Yorkshire differently (or failing to treat like cases alike) compared with other Transition regions or devolved regions.
• Whether the Secretary of State failed to take into account a mandatory relevant consideration — the economic needs of Transition regions — under domestic public law.

Court's reasoning. The court accepted that EU principles of proportionality and equal treatment applied, but explained that proportionality typically requires a legal reference point (for example a derogation from a specific right). In the absence of such a specific legal standard governing internal allocation methodology, proportionality added little beyond rationality review. The nature of the decisions — political, economic and social choices about funding distribution — attracted a wide margin of discretion. On equal treatment the court held the principle is context-specific; where comparisons involve multi-factorial economic judgments the decision-maker is entitled to substantial latitude in determining which regions are comparable. The Secretary of State's choice to base English Transition allocations on 2013 commitments (Option B) was a lawful policy choice among reasonable alternatives, and the evidence showed that Ministers had considered other options, including using a 2007–13 average, and rejected them for bona fide and intelligible reasons. Finally, the court accepted that the reduction of regional disparities was a mandatory consideration but found that the Secretary of State did take account of economic needs and did not ignore them.

Procedural posture. Stewart J in the Administrative Court had found non-compliance with the public sector equality duty under section 149 of the Equality Act 2010 but otherwise dismissed the claim ([2014] EWHC 232 (Admin)). Permission to appeal was granted and the Court of Appeal heard the appeal and dismissed it, concluding the High Court had reached the right conclusions.

Appeal dismissed. The Court of Appeal held that (i) proportionality did not require a more exacting review in the absence of a derogation from a specific legal standard and that where high-level political and economic choices are involved a wide margin of discretion applies; (ii) on the equal treatment issue the Secretary of State was entitled, within that wide margin, to treat English Transition regions on a common 2013 baseline and the allocation scheme was not irrational or manifestly inappropriate; and (iii) the Secretary of State did not fail to take into account mandatory considerations concerning regional economic needs. For these reasons the High Court's conclusions were endorsed and the appeal dismissed.

The claim was heard in the Administrative Court before Stewart J who, in [2014] EWHC 232 (Admin) (7 February 2014), found a breach of the public sector equality duty under section 149 of the Equality Act 2010 but dismissed other grounds. Permission to appeal was sought and adjourned by Sir Stanley Burnton (28 February 2014) pending determination of permission; the Court of Appeal granted permission and, on hearing the appeal, dismissed it on 28 July 2014 ([2014] EWCA Civ 1080).