Funding matters

Essential reading for those working in the field of SEND is the case of Simone and others v Chancellor of the Exchequer and Secretary of State for Education [2019] EWHC 2609 (Admin) a decision of Mr Justice Lewis which was handed down earlier this week.

The case concerns a challenge to public funding policy concerning SEN, where in essence the court was urged to review macro-economic decisions of government, self evidently, where there is a limited pot of cash for all public spending, hard decisions have to be made as to priorities.

I hope it is not unduly cynical to observe that the case was accordingly doomed to failure:  despite the recent decision in the Miller case and the acres of commentary about the “constitutional court” the United Kingdom has found that it possesses, the courts have long been sensitive to the multi-factorial nature of such decisions. The case is resonant rather of the challenges brought by the Fawcett Society and a number of other bodies to budget making decisions.

The ambit of the case was described as follows:

1.This is a claim by three claimants challenging decisions by the Chancellor of the Exchequer and the Secretary of State for Education relating to the provision of funding for special educational needs.

2. The claimants challenge the budget announced in October 2018 and what is described in the claim form as the ongoing failure to allocate sufficient resources, most recently on 16 December 2018, for the provision of special educational needs (referred to as high needs). The autumn 2018 budget did not include provision for additional allocations of funds for high needs expenditure and, in particular, did not allocate funds for a bid made by the second defendant for high needs capital spending (to create a specified number of additional places for children with special educational needs at state funded mainstream or special schools). The decision of the 16 December 2018 involved the allocation by the second defendant of £350 million comprising £125 million for high needs revenue funding in each of the years 20182019 and 2019-2020 and £100 million for capital expenditure to create approximately 1,600 new places for children with special educational needs.

The grounds upon which judicial review was sought were framed in these terms:

3. The claimants challenge the decisions on four grounds. First, they contend that each of the defendants breached his duty under section 149 of the Equality Act 2010 (“the 2010 Act”) to have due regard to certain specified equality matters in the exercise of their respective functions. Secondly, they contend that the second defendant, the Secretary of State for Education, breached the duty imposed by section 7 of the Children and Young Persons Act 2008 (“the 2008 Act”) to promote the well-being of children in England. Thirdly, they contend that the decisions taken by each of the defendants are irrational. Fourthly, they contend that the defendants have breached Article 14 of the European Convention on Human Rights (“ECHR”) read with Article 2 of the First Protocol (“A2P1”) or Article 8 ECHR as they contend that the decisions involve differential treatment of children with special educational needs as compared with other children who do not have such needs and that the defendants cannot justify that differential treatment.

Before considering the court’s decision on each of these grounds and why the challenges failed, the judgment contains a valuably pithy summary as to how SEN is funded by central government:

20. The Secretary of State for Education provides funding for schools by, primarily, the Dedicated Schools Grant (“the DSG”). This is financial assistance provided pursuant to section 14 of the Education Act 2002. It is a condition of the DSG that local authorities spend the assistance only on the schools budget as defined in the relevant regulations. The DSG allocations are currently made in two stages. A provisional allocation is made in about the middle of the year and the final allocation is made towards the end of the year.

21. DSG allocations are divided into a number of funding “blocks”. Those most relevant for present purposes are the schools block and the high needs block. These blocks contain the elements of the DSG which fund the majority of services and provision for children and young people with more complex needs. The schools block is expected to bear expenditure of up to £6,000 for special educational provision for each child with special educational needs and the high needs block provides funding for additional special educational needs provision.

22. Each year, the Secretary of State determines the relative size of each funding block within the DSG and that is then distributed between local authorities using the national funding formula. That formula was introduced for the schools and high needs blocks in the 2018-2019 allocations. The formula relating to high needs expenditure uses a series of factors such as population, deprivation, low attainment, health and disability to allocate funds to local authorities in a way which is expected to reflect anticipated expenditure by those local authorities. When statutory provisions were made extending the provision of EHCPs up to those aged 25, all funds previously supporting young people aged 16 to 25 were moved to the high needs block. In addition, additional sums (£272 million in 2013-2014, and £390 million in 20142015) were added to the DSG to take account of the extended age range. According to Mr Foot’s evidence, the 2015 spending review capital expenditure amounts were based on an estimate of likely demand for special educational need provision which transpired to be an underestimate.

23. There is provision for a local authority to make a limited transfer of funds from one block to another. First, a local authority may, with the agreement of its schools’ forum, transfer 0.5% of the schools block to the high needs block each year in order to fund expenditure on special educational needs provision. In the 2018-2019 financial year, about £80 million was transferred to the high needs block. Secondly, a local authority may apply to the Secretary of State for approval to transfer more than 0.5% from the schools block to the high needs block. For the 2018-2019 financial year, 27 local authorities pursued requests and of these 17 were fully or partially approved for transfers of about £26 million to the high needs block.

24. In addition to allocating the DSG, the Secretary of State may make further allocations of additional funds when funds become available within the department’s budget for some reason. Additional funds most often become available because of changes in the data or forecasts which result in a difference between the funding allocated and the total funding required (for example, where the total number of pupils in a given year is less than anticipated).

25. Local authorities may have reserves and may have other sources of revenue such as council tax and business rates. Local authorities may use reserves and other sources of revenue to fund expenditure on special educational needs provision.

The actual decisions under review were described in these terms:

52. Against that background, and having regard to the claim form and the written and oral submissions made by the parties, the issues that arise can be conveniently analysed in the following way. The claim form seeks to challenge the autumn budget 2018 and the ongoing failure to allocate sufficient resources including most recently on 16 December 2018. The grounds of claim refer to the allocation of the overall DfE budget, and the proportion of that budget to be spent on funding special educational needs provision in England.

53. In fact, as the factual summary above sets out, the autumn 2018 budget did not allocate the overall DfE budget. That had been allocated in the 2015 spending review. The decisions taken by the Chancellor of the Exchequer relating to education include the decision not to allocate funding for the high needs capital bid made by the Secretary of State and to allocate £400 million to schools in the form of a one-off direct payment in 2018-2019 using a weighted formula.

54. In relation to the Secretary of State for Education, his decisions include the decision to bid for the inclusion of additional high needs capital expenditure, but not high needs revenue expenditure, in the autumn 2018 budget. They also include the decision to allocate an additional £350 million as announced on 16 December 2018. On occasions, in oral submissions, Ms Richards Q.C. for the claimants, sought to describe the functions, or decisions, in a broader way, referring for example, to the function of the Chancellor of the Exchequer in deciding what additional funding to provide to the DfE or, in the case of either defendant, deciding what to spend on special educational needs provision. In my judgment, in analysing the grounds of challenge, it is helpful to focus on the specific functions exercised and the specific decisions made.

Against that background the court went on to consider the particular grounds of review that were advanced, dealing first of all with the well worn principle of the public sector equality duty contained in section 149 of the Equality Act 2010. I remember fondly utilising this principle, and indeed insofar as cases were concerned with issues concerning disability discrimination its predecessor section  49A n the Disability Discrimination Act 1995 in various claims over the years. The approach to application of section 149 was described in these terms:

61. The general approach to whether the public sector equality duty has been complied with is well-established. Relevant principles are set out in the decision of the Court of Appeal in R (Bracking) v Secretary of State for Work and Pensions [2013] EWCA Civ 1345; [2014] EqLR 60, especially at paragraph 26. There, the relevant government department decided to close a fund operated by an independent nongovernmental body which, broadly, provided funding to assist disabled persons to lead independent lives. On the facts, the Court of Appeal concluded that the information provided to the relevant minister did not give her an adequate awareness that the proposals would place independent living in serious peril for a large number of people and the Court concluded, in that particular case, that the minister had not complied with the public sector equality duty and quashed the decision. As the Court of Appeal has subsequently observed, that decision has to be read in context and the application of the public sector equality duty will differ from case to case depending upon the function being exercised and the facts of the case. Furthermore, courts should be careful not to read the judgment in Bracking as though it were a statute. See Powell v Dacorum Borough Council [2019] EWCA Civ 23, [2019] HLR 21 at paragraph 51.

62. The Court of Appeal in R (Baker) v Secretary of State for Communities and Local Government [2008] 2 P. & C.R. 6 has also given valuable guidance on assessing whether there had been compliance with section 71 of the Race Relations Act 1996 (“the 1996 Act”). Similar principles apply to the equivalent duty in section 149 of the 2010 Act: see Hotak v London Borough of Southwark [2016] A.C. 811 at paragraphs 73 to 74. In broad terms, the duty is a duty to have due regard to the specified matters, not a duty to achieve a specific result. The duty is one of substance, not form, and the real issue is whether the relevant public authority has, in substance, had regard to the relevant matters having regard to the substance of the decision and the public authority’s reasoning. The absence of a reference to the public sector equality duty will not, of itself, necessarily mean that the decision-maker failed to have regard to the relevant matters although it is good practice to make reference to the duty, and evidentially useful in demonstrating discharge of the duty (see, e.g., Baker at paragraphs 36 to 37, and Bracking at paragraph 26). As Lord Neuberger observed at paragraph 74 of his judgment in Hotak v London Borough of Southwark “the weight and extent of the duty are highly fact-sensitive and dependant on individual judgment”.

63. Furthermore, it is helpful to identify the specific functions that a defendant is exercising as it is in the exercise of its functions that a public authority is under a duty to have due regard to the specified matters. The question of what regard is due will be influenced by a number of factors including, but not limited to, the nature of the decision being taken, the stage of the decision-making process that has been reached and the particular characteristics of the function being exercised.

This argument did not really get off the ground. The papers before the court clearly showed an appreciation of the effects or consequences of a decision. It should be noted that the duty is to have “due regard” to the consequences of a decision, not to reach a particular decision. Public authorities have “raised their game” in the decade or more since these duties have been in force, and provided there is a paper trail, showing that “due regard” was had to matters pertinent to the factors in section 149, there is little scope to mount a merits based challenge.

Consideration then moved to the equally woolly duty under section 7 of the Children and Young Persons Act 2008 to promote the welfare of children: a target duty. Because it is a target duty it is not specifically enforceable by way of enforcement in the courts, by an individual who can say particular steps should have been taken to afford him particular benefits.

This challenge failed too. In such circumstances, the rationality challenge, which still creates a high hurdle for claimants notwithstanding the move away from describing such a challenge as “Wednesbury unreasonable” over the last 50 years, also failed too.

92. The second defendant was well aware of the position relating to the funding of special educational needs provision including, amongst other things, the fact that demand for EHCPs had exceeded expectations and the fact that many local authorities had spent more on special educational needs than provided for in the high needs funding block. Those matters appear, from example, in the business case for the high needs revenue bid that was prepared. In the context of seeking additional funding in the autumn budget, the second defendant acted rationally in making the bids that he judged most likely to succeed, including the high needs capital bid and the children’s social services bid, and not making bids which he considered were unlikely to succeed. Further, there was nothing unlawful or irrational in deciding subsequently to allocate a further £225 million to special educational provision from within the departmental budget. There was nothing illogical or irrational in deciding, when it transpired that the department had further unallocated spending of £175 million because of lower than anticipated pupil numbers for 2019-2020, to allocate a further £125 million for special educational needs provision whilst reserving £50 million to meet potential future financial pressures. Those were decisions that were essentially ones for the Secretary of State to make as to how to allocate funding within the scope of his departmental budget. None of the decisions were irrational.

Perhaps the most interesting aspect of the judgment was the conceptualisation given to the discrimination claim. As the High Court judge observed:

99. The situation in the present case does not begin to amount to differential treatment. Children and young persons with special educational needs are not treated in the same or a similar way to others who do not have such needs. They are treated in a fundamentally different way both legally and factually. Legally, there is a particular legal regime contained in the 2014 Act aimed at identifying those with special educational needs. The parents of children, or young persons, may request an assessment of their needs. If appropriate, local authorities must prepare, and maintain, EHCPs specifying, amongst other things, the special educational provision that needs to be made for the children and young persons concerned. There are rights of appeal against a refusal to assess or against the content of an EHCP. A local authority is obliged to secure that the special educational provision specified in the EHCP is provided (and cannot refuse to do because of lack of resources). Factually, the funding system provides for additional funding through the high needs funding block. That is currently over £6 billion a year. In addition, if local authorities need more money to ensure that special educational provision is made, they will need to transfer money from other parts of their budget or from reserves. Recognising the financial pressures on local authorities to meet their legal obligation to provide the specified special educational provision, the second defendant has, from time to time, made additional funds available specifically for special education needs as he did with the allocation of an additional £350 million in December 2018. The 2019 spending review will address the budget for special educational needs for future years.

100. In those circumstances, there is no reasonable basis for concluding that the defendants are treating children and young persons with special educational needs in a similar way to other children who are in a different position as they do not have such needs.

Finally, there was a warning shot fired in relation to other budget challenges which might be made, although permission to bring a claim for judicial review was granted in this case:

112. Permission to apply for judicial review should be granted if a claimant shows that the one or more of the grounds gives rise to an arguable case that a reviewable error exists and there is no discretionary or other bar to bringing the claim. An arguable case requires that a point exists which merits investigation at a full hearing with all parties represented and with all relevant evidence and arguments on the law. On balance, I am just satisfied that, considering the claim form and the original summary grounds in this case, that each of the four grounds set out in the claim form was arguable in that there were points which existed which merited full investigation at a hearing. I therefore grant permission to apply for judicial review of the decisions identified in the claim form dated 17 December 2018 on each of the four grounds identified in that claim form.

113. That conclusion should not, however, be seen as an indication that similar challenges in this context – that is, to the budgetary decisions of central government – will be granted permission in other cases. That will be a matter for the judge considering any application for permission on the facts of those cases. Furthermore, this judgment sets out the decision-making process for determining the allocation of departmental expenditure at a spending review and the role of the budget. The judgment also demonstrates the importance of identifying the decision under challenge identifying the legal error said to have been made in relation to that decision. The likelihood is that many grounds of challenge to decisions involving the allocation of expenditure will not give rise to arguable grounds of challenge.

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