Rotherham Metropolitan Borough Council & Ors, R (on the application of) v Secretary of State for Business, Innovation and Skills

A public authority allocating fixed EU Structural Funds within regional categories has a wide discretion to choose a rational methodology. EU cohesion objectives and regional GDP do not impose a legally binding allocation criterion where the applicable legislation leaves the domestic allocation to the Member State. Political and macroeconomic judgments attract a high threshold of review.

Equal-treatment, proportionality, irrationality and relevant-consideration challenges will ordinarily stand or fall with rationality where no more specific legal standard governs. However, the Equality Act 2010 public sector equality duty applies when final regional funding allocations are made. A later equality assessment cannot cure a failure to have due regard before the decisions.

Local authorities in the Sheffield City Region and Liverpool City Region challenged the Secretary of State’s decisions allocating EU Structural Funds for 2014–2020. The first decision allocated funds between the four countries of the United Kingdom. The second allocated England’s funds between regions and Local Enterprise Partnership areas.

The claimants alleged irrationality, unequal treatment, disproportionality, failure to consider relevant matters and breach of the public sector equality duty under section 149 of the Equality Act 2010. Their principal complaint was that the second decision used the comparatively low 2013 allocation as its baseline, despite Merseyside and South Yorkshire having received tapering transitional support during 2007–2013.

1. Rationality and discretion. The challenges to both allocation decisions failed on irrationality, equal treatment, proportionality and relevant considerations. The relevant EU instruments did not require the Secretary of State to allocate funds by reference to EU-average GDP, or to adopt the Commission’s methodology for distributing funds within regional categories. The funds available to the English Transition regions were fixed, so increasing one allocation would reduce others.
2. Wide margin of discretion. The decisions involved political policy and macroeconomic judgment at the highest level. The Secretary of State was entitled to adopt a two-stage approach, equalising reductions between the four UK countries and then using the 2013 allocation as the baseline for English Transition regions. He was not required to undertake a retrospective hypothetical calculation of what Merseyside and South Yorkshire might have received had they been Competitiveness regions.
3. Transitional funding. Article 8(2) and Annex II paragraph 6(b) of the Council Regulation (EC) No 1083/2006 provided transitional support for Phasing-in regions, but that support tapered to the national average by 2011. It was therefore rational to regard the elevated 2007–2010 allocations as temporary and not to use the 2007–2013 average as the baseline.
4. Proportionality and equality. Because no specific EU legal standard governed the domestic allocation methodology, proportionality added little to rationality. The Secretary of State was entitled to treat the English Transition regions alike despite their different funding histories, provided the decision was rationally justified.
5. Public sector equality duty. The final allocations were not preliminary or provisional. The Secretary of State therefore had to have due regard to the objectives in section 149(1)(a) and (b) of the Equality Act 2010. He accepted that no such consideration occurred before either decision. The later Equality Impact Assessment could not cure that defect. The claim succeeded on this ground, and consequential orders were to be determined after further submissions.