Birmingham City Council, R (on the application of) v Secretary of State for Transport

A general governmental policy of long-term support does not create a substantive legitimate expectation that funding will continue unless exceptional circumstances arise where the governing documents reserve the right to reassess support and state that it is not guaranteed. A procedural legitimate expectation may nevertheless arise from sustained, focused engagement. Where the Government changes its position and relies on new matters as determinative, fairness may require the affected party to be given a further opportunity to respond before the decision is made. The court should be slow to conclude that representations could not have affected the outcome, particularly where the party has substantial knowledge of the relevant evidence.

Birmingham City Council challenged the Secretary of State for Transport’s decision to reject a revised highways maintenance Private Finance Initiative arrangement and withdraw PFI credit funding. The Council relied on the PFI Credit Letter of 14 July 2010 and the Local Government PFI Project Support Guide (2009-10), asserting a substantive legitimate expectation that support could be withdrawn only in exceptional circumstances. It also alleged procedural unfairness because the Government relied on balance-sheet treatment, risk transfer and affordability as decisive matters without giving the Council a further opportunity to address them.

The claim was heard as a rolled-up judicial review. The central issues were the scope of any legitimate expectation and whether the decision-making process was fair.

1. Permission and outcome. Permission was granted on grounds 1 to 4. Grounds 1 to 3 failed. Ground 4 succeeded. Permission was refused on grounds 5 and 6. The decision of 30 November 2023 was quashed.
2. Substantive legitimate expectation. Read together, the PFI Credit Letter and Section G of the Guide stated a policy of long-term support for good PFI projects, but expressly provided that support was not guaranteed and that termination or major variation would lead to a review of the arrangements and their funding implications. Paragraph 2.1 of Section G gave practical guidance and an example of exceptional circumstances. It did not promise that support could be withdrawn only in such circumstances. The Council therefore failed to establish the alleged substantive legitimate expectation.
3. Procedural fairness. The Government had engaged closely with the Council since 2019 and encouraged it to develop its revised proposals. Until submission of the final business case, balance-sheet classification, reduced risk transfer and affordability had not been communicated as decisive or insurmountable obstacles. Their emergence within Government as determinative factors represented a clear shift in position. Fairness required the Council to be given a further opportunity to make representations on those matters before the decision was taken.
4. The court rejected the irrationality and relevant-considerations challenge. Accounting treatment, risk transfer and affordability were material considerations and were taken into account. The reasons challenge was also not arguable: the decision letter gave proper, adequate and intelligible reasons.
5. The court declined to refuse relief under section 31(3C) of the Senior Courts Act 1981. It was not confident that the decision would have been substantially the same following a fair opportunity to respond.

First-instance judicial review in the High Court (Administrative Court). The decision challenged was the Secretary of State’s decision of 30 November 2023. The claim was partly successful and the decision was quashed on procedural fairness grounds.