Judicial review of cuts is an uncertain road to take

Charities can take councils to court if they act unreasonably, but should think carefully first, argues our columnist Andrew Studd

Andrew Studd
Andrew Studd

Numerous organisations are suffering from severe funding cuts imposed on them by central and local government.

It's not just the severity of the cuts, but the speed with which they are being imposed that is causing difficulty - many organisations are given little or no warning of the situation before the decision is implemented.

Decisions made that quickly can leave organisations in a perilous state, with little chance of adapting to a new funding situation. They will usually have longer-term liabilities, such as leases of premises and contracts with employees, which cannot be met in such a short period of time. This leaves them exposed.

The coalition government has signed up to the renewed Compact, which aims to ensure that the government works effectively in partnership with civil society organisations. It says it should, "where it is appropriate and enables meaningful engagement", conduct a 12-week formal written consultation.

But in many areas, especially in local government, cuts have been made with no meaningful consultation. And even though the Compact is not legally binding, it is a benchmark against which to judge decision-making.

Generally speaking, a clear breach of the Compact, whether national or local, should require a reasoned excuse and, as such, the Compact has its uses. It allows organisations to question why decisions are being made in breach of the Compact and to require some form of justification from government.

Well-drafted grant agreements and contracts will help prevent a unilateral termination or variation of project funding by government.

However, as a generalisation, voluntary organisations have a tendency to accept what they are given rather than negotiate robust agreements - and even if they do negotiate, many still find themselves faced with a unilateral decision to reduce or terminate a funding stream.

And many do not have the resources or capacity to challenge such a decision, even if it is breaches the agreement and the Compact.

A possible alternative is to take such decisions to judicial review. This is no panacea: judicial review is the way the courts supervise bodies that exercise public functions to ensure they act lawfully and fairly.

Only certain decisions may be challenged, and then only by those eligible to do so. Judicial review must be brought as soon as possible and, in any event, within three months of the relevant decision being made.

A judicial review can be made only on certain grounds. The first is illegality - for example, where a decision-maker exercises a power wrongly or purports to exercise a power that it doesn't actually have.

The second is where the decision is irrational - for example, if the decision-maker acted so unreasonably that no reasonable authority could ever have come to that decision.

Alternatively, a judicial review can be used if the decision-maker took into account irrelevant matters or failed to consider relevant matters.

Finally, it can be pursued on grounds of procedural unfairness - for example, failing to consult or failing to give reasons.

Flawed consultation processes are common grounds for a challenge because, even where a decision-maker is not required by statute to consult, it is generally an essential element of a fair process. Any flaw in the consultation can invalidate the decision.

Even if there are valid grounds for reviewing a decision, an organisation must consider at the outset whether it is worthwhile bringing a claim.

London Councils' decision to cut its voluntary sector grants programme was challenged. The court found that the consultation process was flawed because it failed to meet statutory equality duties. London Councils has been required to re-run the consultation process with full equality impact assessments. Whether this will lead to a different decision is yet to be determined.

The six councils that brought a review of the education secretary's decision to terminate the Building Schools for the Future programme won the case technically because the education secretary was required to rethink his decision to scrap the project. But the judge confirmed that the decision was not irrational.

The education secretary might have to reconsider his decision, but will almost certainly reach the same conclusion. The councils have won a pyrrhic victory.

Andrew Studd is a partner in the charity team at Russell-Cooke Solicitors

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