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Ombudsman criticises council for way it allocated Covid grants to businesses

The Local Government and Social Care Ombudsman has criticised the way a North Yorkshire district council administered a discretionary grant scheme which was designed to help businesses impacted by Covid-19.

The Ombudsman's investigation found that Craven District Council displayed a lack of transparency on award criteria for the grants and poor record keeping. It also suggested it gave some businesses discretionary grants for reasons that contradicted the council's own scheme.

However, the council has rejected the report's findings. It said it did not accept it made payments in "direct contradiction" of its scheme, nor that there was a lack of record-keeping. Additionally, according to the council, it "did publish information on its website that explained how claims would be considered against the criteria specified in the scheme".

The complaints that led to the Ombudsman investigating the council were made by two local business owners, 'Mr C' and 'Mr D'. They claimed that the council did not award either of them enough money to cover losses and costs incurred because of the pandemic. Mr C received a grant of £1,000, increased to £2,000 on appeal and Mr D received a grant of £2,000, which was upheld on appeal.

Mr C and Mr D were given the grants as part of a government scheme introduced in March and May 2020, which meant business impacted by the pandemic could receive grants of £25,000, £10,000 or any sum under £10,000.

Upon investigating, the Ombudsman found a lack of transparency with the way the council recorded how it decided the level of grants businesses would receive. The council decided it would favour some sectors over others, but did not publish this information, the Ombudsman claimed.

The report also suggested Craven gave more weight to the business sector than it did to the size of the business or their costs and losses - despite saying these were key deciding factors. The council, therefore, raised some small business owners' expectations that they might receive grants of up to £5,000 when this was rarely the case.

The investigation also found a lack of record-keeping explaining the council's individual decisions and inconsistent decision making, raising concerns with how the council allocated its grants, and at times made awards to businesses in direct contradiction to the rules of its scheme.

In the case of Mr C, the Ombudsman found no record of why officers decided he should receive the initial grant of £1,000. According to the report, when the grant was upgraded to £2,000 on appeal, the appeal panel made a comment that implied the case was not treated consistently with other applications during the initial assessment.

The report found that large grants were given to businesses with a rateable value of more than £51,000, even though the written scheme stated the council had decided businesses occupying properties with a rateable value of £51,000 were not eligible for a discretionary grant. "The Council appears to have made several large awards to such businesses in direct contradiction of the scheme," the report reads.

The report added: "While it recorded reasons for that decision, the relevant email does not explain this would be a departure from the published scheme nor consider the implications of that. This too was fault."

Grants of up to £25,000 were awarded to businesses in contradiction with the council's own scheme and the pot available for awards to micro-businesses was reduced by as much as £175,000 as a result.

Michael King, Local Government and Social Care Ombudsman, said the watchdog had carefully considered how the council had to react quickly to new challenges in preparing its COVID support scheme last year, but had decided the authority still failed to administer it properly.

Mr King added: "We published guidance to councils on good administrative practice during the pandemic, and advised them that those basic principles of openness and transparency should remain the bedrock of councils' work regardless of the external pressures they are under.

"I hope that the 'lesson learned' exercise I have asked the council to carry out will help inform good practice in any future policies and procedures both this, and any other council, introduces."

Cllr Richard Foster, leader of Craven District Council, said the council was "very disappointed" with the findings.

"Since the start of the pandemic, our staff have worked extremely hard to support local residents and businesses," he said. "Our Revenues and Benefits team has distributed grants of over £40 million to over 2,500 local businesses.

"Due to the pandemic, councils were required to deliver payments as quickly as possible. The Government made it very clear that speed was of the utmost importance."

Cllr Foster said that the council "did publish information on its website that explained how claims would be considered against the criteria specified in the scheme, taking into account business size, relatively high property costs and reduced income. We do not accept that we made any payments which were in direct contradiction of our scheme. We also do not accept that there was a lack of record keeping – in fact we had a significant amount of paperwork relating to each application and realistically we could not provide every document for every application to the Ombudsman".

He added: "Like every other council in the country, we were given a fixed allocation of funds and we had an unknown number of potential applicants; therefore it was impossible to advertise in advance the exact amount of grant each business might receive. However, we did show clearly within the local scheme the maximum amounts each category of business might expect to receive.

"Our local approach, supported by local business groups, was to maximise awards as much as possible over as many businesses as possible, within the criteria and priorities defined nationally. Our intention was to get as much money out as quickly and fairly as possible. This approach paid off as we paid out 99% of our discretionary funding, above the nationwide average (95%). This directly benefited our community and businesses, and therefore met the Government's primary objective – something that this decision does not recognise."

The Ombudsman has asked Craven to apologise to both men and pay them £500 in recognition of the distress caused by its raised expectations and uncertainty. It said the council should also ask its scrutiny committee to carry out a ‘lessons learned’ exercise, and provide clear guidance to staff setting out records they should keep.

Adam Carey