The Sefton Care Association & Ors, R (on the application of) v Sefton Council

This is a claim for judicial review of the Defendant’s decision to make no increase for 2011/12 to the fees payable to care homes in Sefton in respect of residents placed in those homes by the Defendant. The decision was made on the 16 December 2010 and effective from 1 April 2011.

The Defendant is the Social Services Authority for Sefton. Of the 150 councils in England, Sefton has the thirteenth highest proportion of people aged 65 and over (i.e. 20% of approximately 276,000 in November 2010). 3,545 residential and nursing care beds are available in Sefton, and as at the end of March 2011 1,595 placements (45%) were funded by the Defendant.

The First Claimant is an unincorporated association representing the interests of proprietors of residential and nursing care homes in Sefton. It has been in existence in its present form since 1993 and has 40 members providing approximately 1,600 of the 3,545 care home beds in Sefton.

The Second to Fifth claimants are proprietors of care homes in Sefton and are members of the First Claimant.

2011/2012 was the second year running in which the Defendant decided that there should be no increase in the fees it paid to care homes in Sefton.

The Claimants do not challenge the decision to make no increase on grounds of irrationality. The decision is challenged on 7 grounds, as follows:

Later in this judgment I shall consider the law relating to consultation and the public sector equality duty under the Disability Discrimination Act. However, before doing so, I shall deal generally with the legal framework appertaining to the fixing by the Defendant of the fees that it pays to residential and nursing care homes.

Every local authority is required to exercise its social services functions in accordance with such directions as may be given by the Secretary of State under section 7(A) of the Local Authority Social Services Act 1970. Furthermore, local authorities are required, in the exercise of their social services functions, to “act under the general guidance of the Secretary of State” (section 7 of the Act).

In the case of R (Forest Care Home Limited) v Pembrokeshire County Council [2010]EWHC 3514 (Admin) Hickinbottom J gave the following exposition of the law applicable to section 7 of the Act, which I gratefully adopt:

“[28] By section 7 of the Local Authority Social Services Act 1970, in performing its functions, the Council must “act under” the general guidance of the relevant Minster or, in respect of a devolved function, the Welsh Ministers. Following guidance is not mandatory: but an authority can only depart from it for good reason. If it deviates from guidance without a considered and cogently – reasoned decision, it acts unlawfully and in a manner which is amenable to judicial review (R v London Borough of Islington ex parte Rixon [1997] ELR 66, especially at page 71; and R (Munjaz) v Mersey Care National Health Service Trust [2005] UKHL 58, especially per Lord Bingham at paragraph 21 and per Lord Hope at paragraphs 68 to 69). Sedley J (as he then was) encapsulated the proper approach to guidance in Rixon as follows:

“ … [W]hile ‘guidance’ does not compel any particular decision …, especially when prefaced by the word ‘general’, in my view Parliament by section 7(1) has required authorities to follow the path charted by the Secretary of State’s guidance, with liberty to deviate from it where the local authority judges on admissible grounds that there is good reason to do so …”

With that I respectfully agree.

[29] The learned judge went on to insert a restriction on the authority’s ability to deviate from the guidance, namely: “… but without the freedom to take a substantially different course”. I hesitate to do anything but agree with that too, because of the eminence of (now) Sedley LJ as an administrative lawyer and the fact that the point is not going to be determinative in this claim; but it seems to me, as a matter of principle, Parliament has given the relevant decision-making power to the local authority and, despite the terms of section 7 of the 1970 Act, it would be open to an authority to depart even substantially from the guidance if it had sufficiently compelling grounds for so doing. However, certainly, the more the proposed deviation from guidance, the more compelling must be the grounds for departure from it”

The Defendant submits that I should adopt the exposition of the legal position of Hickinbottom J in paragraph 29 of his judgment in preference to the exposition of Sedley J. However, it does not seem to me that anything in this case turns upon that difference of judicial opinion since the Defendant does not claim to have departed from the statutory guidance, still less that it had any compelling grounds for doing so.

Formal guidance issued under section 7(1) of the 1970 Act is to be distinguished from general practice guidance issued by the Secretary of State (see Cross on Local Government Law, paragraphs 21-02,03). However a local authority is obliged to have due regard to non-statutory guidance and would have to justify any departure from it (see R (Kaur) v Ealing LBC [2008] EWHC 2062 (Admin) at paragraph 22 per Moses LJ.) For reasons which will appear, I am satisfied that the distinction between formal statutory guidance and general practice guidance is of no significance in this case.

Under section 21 of the National Assistance Act 1948 (“the 1948 Act”) and Directions made under it in Department of Health Circular LAC (93) 10, the Defendant has an obligation to make arrangements for providing “residential accommodation for persons aged 18 or over who by reason of age, illness, disability or any other circumstances are in need of care and attention which is not otherwise available to them.”

Pursuant to section 47 of the National Health Service and Community Care Act 1990, the Defendant will have carried out an assessment of the care needs of such persons. In this case the Claimants do not challenge the care plan or needs assessment of any person whose placement in a care home is funded by the Defendant.

The National Assistance Act 1948 (Choice of Accommodation) Directions 1992

The Secretary of State has issued formal statutory Guidance under section 7(1) of the 1970 Act on the 1992 Choice of Accommodation Directions in Local Authority Circular LAC (2004) 20.

As well as the formal statutory Guidance, the Department of Health in October 2001 issued an Agreement between the statutory and independent social care, health care and housing sectors entitled “Building Capacity and Partnership in Care” (“the Agreement”). In the Foreword the Secretary of State for Health stated that the Agreement marked “the beginning of a new, more positive partnership between the statutory and independent social and health care and housing sectors” and that he had made clear “throughout this Agreement what I expect of commissioners “(which term includes local councils: paragraph 1.3) and providers but also how the Government will assist”.

The Agreement includes the following provisions:

The Claimants submit that the Agreement constitutes formal statutory guidance under section 7 of the 1970 Act. The Defendant does not accept that this is the case, but does not suggest that either it or the Claimants were free to ignore it and indeed Mr Bartley Jones QC for the Defendant, in his oral submissions, accepted that it probably makes little difference whether the Agreement did constitute official statutory guidance.

In my judgment the Agreement was not intended to be, and did not state that it was, formal statutory Guidance, unlike what seem to have been identical provisions issued as formal Guidance in Wales and referred to in the Forest Care Home case. However, I am also of the view that Mr Bartley Jones was right to accept that it made little difference whether the Agreement constituted such Guidance. The Defendant, as previously stated, would have to justify departure from it: as I understand it, not only does it not seek to do that but it contends that in substance it complied with the Agreement by taking reasonable steps to ensure that “appropriate fees are paid”.

At a meeting which took place on 16 April 2003 between officers of the Defendant and representatives of care home providers, broad collective agreement was reached on a new fee structure to be effective from the year beginning 1 April 2003. This provided for the current fees as at March 2003 to be uplifted by an amount in respect of inflation and then to be supplemented by a star quality payment based upon a 2, 3, 4 or 5 star status conferred on a home. These proposed fees were set out in an enclosure to a letter dated 17 April 2003 sent by the Defendant’s principal manager, Colin Speight.

On 7 May 2003 this fee proposal was adopted by the Defendant and accordingly the fees set out on A/158 became payable for the year from 1 April 2003. No evidence has been forthcoming as to how the basic fees as at March 2003 were computed or indeed as to what, if any, analysis of the actual care costs was undertaken in setting those fees. However, it is clear that those fees were accepted by the care home providers for local authority funded placements.

In each year from 2004 to 2009 the Defendant reviewed the fees payable to care home providers in about March of each year. Mr Mathew Purchase, Counsel for the Claimants, has accurately summarised the process that was followed in each of those years, as a three stage process, comprising (1) meetings between the Defendant’s responsible officer and care home providers, where fees were discussed; (2) the preparation by that officer of a report to Cabinet, containing some detail regarding the fees, referring to the concerns and fee aspirations of providers and, after analysis, making a recommendation as to the fees which the officer thought appropriate; and (3) consideration of the report by Cabinet, which made its decision, invariably in line with the officer’s recommendation.

In his Report to Cabinet dated 23 March 2005 the Defendant’s Social Services Director referred to the view of the care home providers that the Defendant was “still some way from paying a “fair price for care”; however, he also noted that the fee increases over the past three years had arrested the closure of independent sector homes in Sefton. A risk assessment had been undertaken and as a result it was stated that for the Defendant to be able to satisfy “a growing number of EMI placements and … to meet its performance agenda, Social Services feels it vital to … moderately increase fees which in turn will improve the quality of services offered”. The recommendations were accepted by Cabinet.

During the consultation process which took place early in 2006, the first Claimant’s chairman, Mark Gilbert, expressed a rather stronger view, namely that “the true cost of care had gone out of the window”. However no substantiation of that assertion was provided nor apparently requested.

In his report to Cabinet dated 8 March 2006 the Defendant’s Social Services Director recommended an inflationary increase of 2.95% on care home fees and provided a risk assessment in almost identical terms to that of the previous year. Again his recommendation was accepted.

In his Report to Cabinet dated 21 March 2007 the Director of Health and Social Care noted the providers’ view that a large increase in fees was required to prevent potential contractions in the residential and nursing care market; in that regard a request for a minimum fee increase of 10% had been submitted since in the providers’ view the Defendant ought to contribute more towards costs, including insurance, regulatory charges, staff training and higher payment costs. However, the Director expressed the view that the Defendant’s fee setting strategy for the past three years had been successful in ensuring that placements were found, it being noted that there had been no home closures due to fiscal reasons for three years. An increase of 2.7% was recommended. A risk assessment had again been undertaken and the result was substantially as stated in previous years.

Similarly in his Report dated 20 February 2008 the Director of Health and Social Care noted the providers’ view that a large increase in fees (£80.00 per week on basic rates) was required to prevent potential contractions; again that was not accepted by the Director and an inflationary increase of 2% on the basic fee was recommended and accepted. The risk assessment was in identical terms to those previously mentioned.

The final report to Cabinet on independent sector contract fees is that dated 18 March 2009 by the Defendant’s Director of Health and Social Care. Under the heading “Residential and Nursing Fees”, the Director referred to dialogues between the providers and the Defendant as follows:

“Residential and Nursing fees

(1)

The Cabinet Member is already aware that the fees paid for Residential and Nursing Care are the subject of a continuum of dialogues between the Sefton Residential and Nursing Associations and the Authority. The Council, despite the recent increases given over the past five years, are still accused by the Association of not paying a fair price for care.

(2)

The Associations are, once again, of the view that a large increase is required to prevent potential local contractions in the Residential and Nursing Care market. However in reality this claim is countered by the fact that there have been no home closures within Sefton due to fiscal reasons now for four years and providers are actually coming into Sefton to expand their business base in this particular sector.

(3)

Notwithstanding these facts the Associations have submitted a request for a fee increase of 6% which is their estimation of what they reckon that the Council should contribute more towards the cost of operations. These include all forms of insurance, regulatory charges, staff training and higher pay costs attributable to the minim wage rises determined by the Government.

(4)

However the Cabinet Member is made aware that the fee setting strategy for the past 5 years has been eminently successful in that a sufficiency of places can continue to be found to satisfy the requirements of the Adults Commissioning strategy and the choice agenda.

(5)

However the Council recognises that there is a need to maintain this availability of places and to preserve the fiscal viability of the independent sector it is considered necessary to increase the fees from April 2009. In previous years there have been two components to be considered, improvements in quality payments and inflationary pressures.”

The Director’s recommendation was for an increase of 2% (as opposed to the 6% requested); once again a risk assessment had been undertaken, and this time it was stated that “the implications of not approving this report demonstrate that the Council may not be able to fulfil its statutory responsibilities for vulnerable people to receive care in either their own homes or in residential accommodation” [my emphasis].

In the result the increases in fees that were provided for in the years from 2004 to 2009 inclusive ensured that the fees broadly kept pace with inflation as measured by the RPI at least until the end of 2009. I deal below with the position thereafter.

In January 2010 the Defendant published a Market Facilitation Strategy for transforming the market for social care in Sefton. Reference was made in the document to continuing pressure for commissioners and providers to meet the objective of developing a market stimulation and development strategy with limited scope for additional funding; a major purpose of the document was said to be to develop supportive processes within a commissioning environment. Under the heading “Where is the market now?” it was stated that “At a basic level we will carry out an assessment across the Local Authority and PCT area of what services are provided, in what volume, by whom, where and at what cost.” The document contained an Action Plan for 2010/11, which included the following under the heading “Market Intelligence”

Notwithstanding the above Action Plan the Defendant, on 3 February 2010, informed the care home providers that there would be no increase in fees for 2010/11. On the 11 February 2010 representatives of the 1^st Claimant attended a meeting with representatives of the Defendant, at which it was stated that the Defendant was facing an £800,000 overspend on community care in 2010/11 and given the current economic climate was not able to support any increase in fees for that financial year. However it was stated that the Defendant had allowed for a 2% increase in its medium term financial plan for the following two years, although that might be affected by unforeseen pressures.

Unlike what had happened in previous years, there had been no prior consultation with the care home providers regarding the freezing of fees, nor has any report to Cabinet regarding the fee proposal been disclosed.

The Defendant’s decision regarding the pay freeze was confirmed by letter dated 16 February 2010 to the 1^st Claimant.

On 16 March 2010 the Care Quality Commission issued its inspection report following its service inspection of Adult Social Care in Sefton in December 2009. This was a favourable report, making reference to sound commissioning processes and good relationships with the independent sector, including regular forums. The report incorporated quality ratings of residential and nursing care homes, which again were favourable, as will appear.

Meanwhile early in 2010 the Defendant had identified a need to develop plans to address the implications of the very serious financial problems being faced nationally and globally. At that time it was anticipated that there would be a £25m shortfall in the Defendant’s budget over the following three years as a result of reductions in government grants, but at a time of increased demand for services. There was a need to look at all options.

As a result it was recognised that the Defendant would have to prioritise its activities and decide (amongst other things) the functions which it must do. At a Prioritisation Event in June 2010 it was agreed that the care of older and vulnerable adults was a “must do” service.

As part of its transformation programme to address budgetary pressures, officers of the Defendant at the end of July 2010 produced savings proposals which were distributed to elected members. A saving of £1.4m had been identified as resulting if care home fees were further frozen; that proposal was referred to in the document under the heading “Function” as “Review of inflation” resulting in a proposed saving of £1.4m over the three years from 2011/2014. Under the heading “Impact” it was stated that “Capacity in the market could be affected through a breakdown in relationships with the care sector. Increase on third party top-ups”.

This savings proposal was not communicated to the Claimants or other care home providers.

However, at this time by letter dated 30 July 2010 Mr Gilbert requested a meeting with the Defendant’s Chief Executive, Margaret Carney, to discuss concerns of the Claimants. Because Mrs Carney was not available until 7 September, an initial meeting with Charlie Barker, the Defendant’s Strategic Director for Social Care and Wellbeing, was proposed by the Defendant.

That meeting took place on 24 August 2010 and was attended by Mr Barker and other officers of the Defendant and by the members of the 1^st Claimant’s executive, including Dan Lingard, who has provided witness statements in this action. At this meeting the 1^st Claimant’s representatives raised the issue of underfunding of placements and the need (as they saw it) for the Defendant to increase its fee commitment if the private health care sector was to remain viable and capable of meeting requisite standards. Mr Barker responded by stating that he could not comment about fees, as the Defendant did not know what funding it was going to get.

The meeting between Mrs Carney and the first Claimant’s Executive took place on 7 September 2010. Again Mr Lingard was in attendance and his evidence as to what was stated at the meeting is uncontradicted. He says that the first Claimant’s representatives raised “what we considered to be the chronic underfunding by the Council in respect of its fee rates. We raised our concern about the way the Council was trying to encourage investment and transformation, yet at the same time was not paying a rate that allowed providers to meet and maintain the basic standards, let alone invest and transform” (paragraph 36 of his statement). Reference was made to the proposed 2% increase for the years 2011/12 and 2012/13 (referred to in paragraph 32 above), the Claimant’s representatives maintaining that having regard to the inadequacy of the existing basic fee, there was “the dire need for the Council to increase its fee rate beyond its committed 2%. We kept saying that providers desperately needed the Council to set the basic fee at a rate that reflected the actual cost of providing the services that it commissioned.”

Mrs Carney expressed sympathy but was non committal, highlighting the Defendant’s difficult financial position, given looming budget cuts. She asked if the 1^st Claimant would be prepared to sign a joint letter to the Chancellor of the Exchequer seeking additional funding; this course was agreed, and as a result on 9 September 2010 a letter was sent to the Chancellor signed by Mrs Carney on behalf of the Defendant and by Mr Lingard on behalf of the 1^st Claimant, advising the Chancellor of the resolution of the Defendant on 2 September 2010 calling upon the government to recognise that the Defendant had a significantly higher proportion of older people within its population compared to the national average and requesting the Chancellor to increase the government grant to allow the Defendant to meet the needs of this ever increasing section of the community.

At the meeting on the 7 September 2010 Mrs Carney did not mention the proposal to freeze the care home fees for 2011/12 (and beyond).

On 30 September 2010 the Defendant’s cabinet endorsed “the commencement of negotiations with the independent nursing home and domiciliary care sectors with a view to reaching an agreement on the payment of inflation for 2011/12” (C138). In fact, as noted by Jan McMahon, the Defendant’s Head of Transformation Services, the proposal, as previously stated, was for a nil increase for inflation for that year. In the event there were no negotiations with a view to reaching such agreement; as to whether there was indeed any meaningful consultation at all is a matter with which I shall deal in due course.

On the 9 November 2010 a further meeting took place between the 1^st Claimant’s Executive (including Mr Lingard) and representatives of the Defendant’s Social Care team, including Mr Barker. Again the 1^st Claimant’s representatives raised the issue of what they stated was the dire need for a fee increase in excess of the 2% which they thought was proposed. Mr Barker responded that he could not commit what the Defendant would be able to pay by way of fees as it still had not received its funding budget, but he stated that he expected there would be another freeze on the basic fee rate, which could continue for the following three to four years (in other words to 2014/2015).

That meeting caused Mr Lingard, who had become the Chair of the first Claimant, to write to Mrs Carney on the 17 November 2010, firstly asking whether there had been a response to the letter to the Chancellor. The letter then continued as follows (and in view of the importance that the Defendant attaches to the letter, I shall quote its terms verbatim):

“Also earlier this month we completed a ‘partnership’ meeting with the executive team at Sefton Social Services and have been informed that funding of these critical community care services will in real terms be cut.

We understand there is to be a freeze in the Council’s contribution to care and nursing services for 2011/12 and potentially for the next 3 to 4 years.

Given unavoidable cost increases in 20/10/11 alone are already running at around 6.5%, this is a significant and long term reduction of funding of services.

No one is in any doubt as to the severity of the stringent financial times we are now in and have been for at least the last 18 months, however we can not escape the consequences of this decision.

There is a challenging environment for investment in services and there is now a genuine risk that some providers will choose to exit or close. Regardless, quality will be seriously challenged, or at least access to the same quality will reduce for the public.

Your own executive have already informed CQC (our mutual inspector) that you as a council will be unlikely to maintain your quality standards this year; you can understand how your providers will struggle too with the same fundamental problem, insufficient funding.

At our meeting with you earlier this year, and as part of our mutual wish to find some areas of progress, we asked that you look at the action the council could take to support the sector and we identified a number of administrative issues, (some being long standing requests), including the use of BAC’s payments instead of cheques and the collection of clients full fees as per the Lancashire Council & Lancashire Care Association agreement (a well respected ‘partnership’).

At the time of writing no further progress has been made on these items and in light of the challenges ahead of us all, resolution of these two items would provide solid evidence of a working partnership.

Our association remains committed to being an integral contributor to the necessary and over due transformation of health and social care services for our citizens.”

In the course of closing submissions, Mr Bartley Jones stated that this letter was taken by the Defendant to amount to “resigned acceptance” of the freeze for 2011/12. However Mr Lingard states that the 1^st claimant’s executive understood that the position with regard to the finalisation of the fee rate had yet to be determined on 17 November 2010, as indeed was the case. However he clearly believed from what he had learned at the meeting on 9 October 2010, that fees would not be increased because that is what he reported to a DementiaForumon 19 November 2010.

In November 2010 the Defendant produced an Equality Impact Assessment “umbrella” document for the purposes of equality legislation, and I shall deal with this when considering the position with regard to the Disability Discrimination Act.

On 27 November 2010 a full Council briefing was undertaken by the Defendant on the subject of Budget Prioritisation, given the need to achieve what were then envisaged to be total budget savings of £58.5m over the following three years. Among “Other Potential Savings” identified was “Adult Social Care - No Inflation”.

On 4 December 2010 the Defendant held a full day members’ workshop, when members were made aware of the proposals that were intended to be made to Cabinet and Council on 16 December 2010. Among the papers presented was one headed “Budget - Present Position for the three years to 2013/14.” Among the proposed additional savings indentified was “Adult Social Care – Inflation -[£]1.513”.

On 16 December 2010 the Defendant resolved, in accordance with the Cabinet’s recommendation, to make no increase for 2011/12 in the fees payable to care homes in respect of residents placed by the Defendant.

Before so recommending and resolving, the Cabinet and Council had Mrs Carney’s report dated 16 December 2010. That recommended that Cabinet and Council agree the assessment of critical, front line and regulatory services as defined in appendices A, B and C and approve the associated savings as defined in Appendix B.

In paragraph 4.5 of her report (under the heading “Tactical Savings Options”), Mrs Carney stated that “a high-level equality impact assessment has been completed on the enclosed savings proposal and no disproportionate adverse impacts have been identified … Specific equality impact assessments, including appropriate service user consultation, will be undertaken which will involve the delivery or commissioning of services to people with protected characteristics, in order to mitigate the impact of reductions or cessation in services”.

I shall consider the Equality Impact Assessment later in this judgment, but I note at this point that there was no proposal to reduce or cease any of the services provided in care homes.

Mrs Carney’s report is a very lengthy document but the proposal to withhold the inflation element to all adult social care providers resulting in a saving of £1,513,000 is clearly stated therein (at internal page 124) (A249), although at first sight it would appear from appendix A (A230) that an increase of £1.476m was proposed in the Nursing Care Adults budget for 2011/12, although on careful reading it is clear that that was not to provide an inflation linked increase in fees but was to provide for anticipated increases in demand over the year.

Mrs Carney did not reply to Mr Lingard’s letter of 17 November 2010 until 20 December 2010, after the decision had been made. In that letter Mrs Carney did not actually inform Mr Lingard of the Council’s resolution; what she stated (so far as material) was as follows:

“In total terms Sefton Council will need to find £64m savings over the next two years. This represents 27% of our directly controllable budget. We are currently making plans to identify and deliver this requirement but this means that very tough decisions will need to be made.

Reference is made to your recent meeting with senior managers from Adult Social Care where your association was advised that, due to the fiscal situation facing all Councils in general, and Sefton in particular, no inflationary increases for social care provision would be applied for 3 years period from April 2011.

We appreciate that you have an understanding of the Council’s stringent fiscal problems and we note your concerns on the matter of maintaining quality services and preventing contraction of the market in Sefton. However we are still not in a position to offer any element of increase and unfortunately we will have to wait to see if the outcomes you predict comes to fruition.”

In submissions, the Claimants have described Mrs Carney’s position of having to wait and see if the outcomes predicted by Mr Lingard come to fruition as reckless; however I accept that the Defendant did not believe, for reasons which I shall state, that such outcomes would occur.

By letter dated 12 January 2011 Mr Speight informed all care home providers that the Defendant would be unable to award an inflationary increase in fees on all current placements for 2011/12. His letter referred to the Defendant having a funding shortfall of some £53m and of the objective of addressing the deficit while protecting front line services. He stated that the Defendant realised that its decision might cause consternation in “the local Social Care arena” but “you will agree that in these extremely arduous times the local and national market has escaped the financial downturn that has dramatically affected other sectors of the economy”.

By letter dated 23 March 2011 the first Claimant’s solicitors sent a letter before claim to the Defendant, contending that the decision not to increase fees was unlawful.

The Judicial Review Claim form was issued on the 11 April 2011.

Ms Cater is the Defendant’s Commissioning and Contracts Manager. Although she did not obtain or consider evidence of the actual costs to providers of providing care, she did ensure that a range of intelligence data was obtained and provided to those considering fee levels, aimed (she says) at ensuring that a sustainable and developing market in care existed. In effect her evidence is that fees were set at an adequate level to ensure such a market. The matters upon which she relies may be summarised as follows:

As previously stated, it is common ground that the Defendant’s fees broadly kept pace with inflation as measured by the RPI, at least until the end of 2009. The Defendant produced tabular evidence showing that its residential and nursing 4 and 5 star fees were ahead of inflation up to the end of 2010 (A166 and 167). However, the Claimants have produced up to date Tables, including 2011 figures, showing that the basic fees and 4 and 5 star quality rated fees have significantly fallen behind inflation when the year commencing April 2011 is included (B189/191). These figures have not been challenged by the Defendant.

In any event what is clear is that fees have not been increased since April 2009, whereas inflation measured by the RPI in 2010 was 4.6% and in 2011 (to the end of May) 5.2%.

Laing and Buisson are the UK market leaders in the provision of information and marketing intelligence on the independent Health and Community Care sectors. They have developed a costing model entitled “Fair Price for Care” with the object of enabling a fair price to be calculated, taking account of the actual cost of the provision of care. Whist the model is susceptible to many arguments in relation to costings and assumptions, the national guidelines published for 2010/11 indicates fees significantly higher then the Defendant’s: for residential homes the Laing and Buisson range was £482 to £561 per week (as compared to the Defendant’s fee range of £349 to £389). For nursing homes the Laing and Buisson range was £613 to £694 (as compared to the Defendant’s range of £470 to £510).

In March 2011 Laing and Buisson prepared a report applying the Fair Price Model to the Wirral area, which is fairly close to Sefton. That produced figures significantly lower than the national guidelines, but again significantly higher then the Defendant’s for 2011/12: the Laing and Buisson range for residential home fees in Wirral was £430 to £506 per week and for nursing home fees £572 to £662 per week (depending upon quality standards). Wirral Council, however, has not accepted the report.

The Claimant submits that it is plain the Defendant simply did not have due regard to the actual cost of care. It is pointed out that nowhere in the documentation is there any assessment, even in rough terms, of what the actual cost of care is, nor any analysis of cost increases, or likely cost increases, compared with previous years. It is submitted that it was the Defendant’s responsibility, as a public authority, to assess and have due regard to the actual costs of care, given that the level of fees affects not only the Claimants, but also vulnerable residents. It is pointed out that in the course of his oral submissions Mr Bartley Jones stated expressly that the Defendant did not “know what the actual costs are” and submitted that it might well be the case that the fees freeze simply has bitten into the provider’s profits, rather than resulted in under provision as regards costs.

In response the Defendant submits:

In my view, taken as a whole, the statutory Guidance and the Agreement do not contemplate that there will be any significant imbalance between the usual cost of care and the actual cost. If a local authority consciously fixes the usual cost in a sum significantly less than actual costs, then I do not see how it could be said to be having “due regard to the actual costs of providing care” as required by paragraph 2.5.4 of the Guidance. Furthermore, such action by a local authority would in my judgment amount to a breach of the guidance contained in paragraphs 6.2 and 6.7 of the Agreement, namely to take account in fee setting of the legitimate, current and future costs faced by providers, as well as the factors that affect those costs, and to ensure that appropriate fees are paid. If fee levels are set significantly below actual cost, then, in the words of paragraph 6.2 of the Agreement, there will be “inevitable reduction in the quality of service provision”, which “may put individuals at risk”.

It is true that the Agreement was premised upon adequate funding being provided by central government, but the Defendant does not claim to have consciously departed from the requirements of the Guidance and Agreement which I have cited, nor to have had any lawful justification to do so. Nor can I see how inadequacy of central government funding could excuse a failure properly to consult with providers.

Whilst I agree that there is nothing in the guidance that requires a local authority itself to undertake an assessment of actual costs, it seems to me that once the claimants asserted (as was done at the meetings in August and September 2010) that there was an underfunding of placements and the Basic Fee did not reflect the actual cost of providing the services commissioned, and was set at a level below what was required to ensure a viable sector, then at the very least, the Defendant, pursuant to its obligation to have due regard to the actual costs of care and the provisions of the Agreement referred to above, should, before re-fixing the fees at the 2009 levels, have asked the Claimants to submit a detailed assessment of what they contended were the actual costs of care so as to substantiate (insofar as they were able) their contention that placements were substantially under-funded in relation to the actual cost of care.

It is true that the Agreement requires a corroborative approach and the providers to be able to provide a full breakdown of the cost of services, but the fact is that the Defendant never asked the Claimants to do this.

As to the evidence of Ms Cater, I am satisfied that the Defendant is able to demonstrate that its usual cost, as fixed up to and including April 2009, had been sufficient to allow it to meet assessed care needs, but due account had been taken of inflation, at least until the end of 2009, and to my mind there is a plain risk of a fall in standards, which may put residents at risk, and of possible home closures, if indeed it is right that the fees, which have been frozen since the April 2009 increase, no longer adequately meet the cost of the provision of care. Whilst it is true that these fees are not out of line with those of other authorities, that does not mean that the fees are adequate, or indeed that these other authorities had due regard to the actual cost of the provision of care. In its Market Facilitation Strategy of January 2010, the Defendant recognised the need to explore the average costs for all types of services to obtain a greater understanding of the links between costs and quality. The requisite work was to be done by September 2010 and it does not appear that such work was ever undertaken.

I am satisfied that there were real grounds for concern about the adequacy of the fees at the end of 2010. The Defendant’s own risk assessment referred to in the report to Cabinet of March 2009 indicated that without the modest increase in fees then recommended (and paid) the Defendant “may not be able to fulfil its statutory responsibilities for vulnerable people to receive care in either their own homes and in residential accommodation”. The fees had been frozen thereafter, notwithstanding the substantial inflation in 2010, which could be expected to continue in 2011. It seems to me that the Defendant did not act in accordance with the Guidance or Agreement when it dismissed the Claimants’ concerns without first having sought particulars of the actual costs of care.

In conclusion, I accept the Claimants’ submission that the Defendant, in fixing the fees in December 2010, failed adequately to investigate or address the actual costs of care with the Claimants (and the other providers), and thereby failed to have due regard to the same, contrary to Guidance and to the provisions of paragraphs 6.2 and 6.7 of the Agreement. As will appear, I am also of the view that the Defendant failed in its duty properly to consult with the providers.

The Claimants submit that there is no evidence of any serious or adequate risk assessment, which it is said there should have been, given that fees were frozen both in April 2010 and April 2011. The Claimants recognise that there are three “Corporate Risk Assessment” documents in the bundle, the last in respect of the position as at 30 November 2010. The risks identified were “Fiscal Fragility of Care Provider Market” and “ensure Care Provider market meets required Sefton Contract conditions and CSCI standards”. After implementation of control measures, the residual risks were rated 6 on the scale of magnitude where the maximum was 25, i.e. a modest residual risk.

The Claimants submit that these risk assessments were “incoherent and obscure”. It is said that their inadequacy is demonstrable by the fact that the risk assessment rating remained constant from the date of the earliest assessment (prior to December 2009) and the latest, notwithstanding the marked change in circumstances, namely the freezing of fees in and after April 2010, notwithstanding the continuing significant inflation.

The Defendant relies on these risk assessments and also upon the data collected by Ms Cater, indicating that fees were set at an adequate level.

In the Forest Care Home case, Hickinbottom J stated (at paragraph 46(6):

“(6)

In making strategic or individual decisions, an authority must have proper regard to the consequences such decisions will or may have on both providers and, especially, the residents of care homes. As with any such assessment, the authority must have regard to both the nature of potential adverse consequences, and the chance of such consequences coming about. A potential or even actual, adverse consequence for providers or residents or both will not necessary be determinative of a decision - an authority does not have a guarantee that its decision will not have adverse consequences for some interested party - however, an authority cannot make a decision that may have such consequences without proper consideration and compelling reasons. That requires an authority to identify any relevant risks, and then assess those risks in terms of the chances of the adverse event occurring and the seriousness of the potential consequences if it does.

That is particular so in respect of potentially adverse consequences for residents, who are necessarily elderly and vulnerable and whose interests are at the heart of the commissioning of care services. An authority cannot make a decision which potentially has adverse consequences for a resident, such as a move to another home or a reduction in the level of care, without proper consideration and compelling reasons.”

It seems to me that if the Claimants can make good their contention that the fees are set at a level significantly below the actual cost of the provision of care then the Defendant’s risk assessments will be invalidated in failing to take such fact, and its implications, into account. It follows that its risk assessments will need to be revisited by the Defendant having regard to the Claimants’ further submissions to it following this judgment.

The Defendant submits correctly that Ms Cater’s evidence deals with factors appertaining to Sefton. However it follows from my finding that the Defendant failed to have due regard to the actual cost of care, that it also failed to have due regard to local factors relevant to such costs, such as local pay levels and property costs. As well as such factors, the Claimant’s cite the dominant position of the Defendant in the market, resulting in the particular vulnerability of care homes if fees are not set at a level properly reflecting actual costs. I agree that this is a relevant factor that should be taken into account when the matter is reconsidered by the Defendant, although of course the weight to be given to it is a matter for the Defendant.

As previously appears, I have accepted that the Defendant has been able to demonstrate historically that its fees (i.e. the usual cost it has set) have been sufficient to allow it to meet assessed care needs and to provide residents with the level of care services they could reasonably expect. However whether this will be demonstrable on reconsideration in the light of the further costs submissions of the Claimants will depend upon the content of such submissions.

I shall consider this submission in detail at the conclusion of this judgment.

The Defendant accepts that it was under a duty to consult in this case and in my judgment that clearly is right. Such duty arose from:

In the case of R v North and East Devon HA, ex p Coughlan [2001] QB 213, the Court of Appeal set out what was required if consultation was to be properly undertaken:

“F. Consultation

108

It is common ground that, whether or not consultation of interested parties and the public is a legal requirement, if it is embarked upon it must be carried out properly. To be proper, consultation must be undertaken at a time when proposals are still at a formative stage; it must include sufficient reasons for particular proposals to allow those consulted to give intelligent consideration and an intelligent response, adequate time must be given for this purpose, and the product of consultation must be conscientiously taken into account when the ultimate decision is taken: R v Brent London Borough Council, Ex p Gunning (1985) 84 LGR 168.”

In paragraph 112 of the judgment the Court stated:

“It has to be remembered that consultation is not litigation: the consulting authority is not required to publicise every submission it receives or (absent some statutory regulation) to disclose all its advice. Its obligation is to let those who have a potential interest in the subject matter know in clear terms what the proposal is and exactly why it is under positive consideration, telling them enough (which may be a good deal) to enable them to make an intelligent response. The obligation, although it may be quite onerous, goes no further than this”

Mr Bartley Jones submits that the consultation carried out in this case, whilst “not brilliant” was in the context of the circumstances and history adequate. It is submitted that the Defendant complied with the requirements for lawful consultation as stated in paragraph 112 of the judgment in Coughlan, in that the Claimants were told of the proposal and the reason for it (namely budgetary constraints) and the Claimants’ response in the form of the letter dated 17 November 2010 was responded to by Mrs Carney’s letter of the 20 December 2010. As previously stated, it is said that the Defendant construed Mr Lingard’s letter as amounting to “resigned acceptance” of the freeze.

Notwithstanding the Defendant’s submissions, I accept the submissions to the contrary of the Claimants, namely that there was no consultation in any meaningful sense with regard to the Defendant’s proposal to freeze the fees. In my judgment the Defendant failed in its duty to engage in proper consultation with the providers of care homes, including the Claimants. The following are my reasons for this conclusion:

In paragraph 46(2) of his judgment in the Forest Care Home case, Hickinbottom J stated: “In deciding whether a person is in need of care and accommodation, an authority is entitled to have regard to its own limited financial resources. However, having set that threshold and found that a particular person surpasses it, an authority is under an obligation to provide care and accommodation in fulfilment of its section 21 obligations (under the National Assistance 1948), which is a specific duty on the authority owed to an individual, not a target duty: lack of resources is no excuse for non-fulfilment of that obligation…”

The Claimants submit that the evidence in this case shows that the decision to freeze fees was taken for budgetary reasons alone or at least to an improper extent, without there being any attempt to balance other factors against the need for financial savings.

However, I accept the Defendant’s submission that this is not a fair inference to draw from the evidence as a whole.

There is no doubt that the decision to freeze the fees was taken because of the budgetary constraints facing the Defendant. However, the Defendant never proceeded upon the basis that budgetary constraints in any way would justify a failure to provide care and accommodation in fulfilment of its section 21 obligations. On the contrary, as already stated, I am satisfied that the Defendant’s officers (and in particular Ms Cater) reached the conclusion that the existing level of fees was sufficient to enable the assessed care needs of supported residents in residential accommodation to be met, even absent any resident or third party contributions. However, I have concluded that the process was flawed in the respects stated above.

That section sets out the duty in the following terms:

“(1)

Every public authority shall in carrying out its functions have due regard to:

(a)

the need to eliminate unlawful discrimination and victimisation;

(b)

the need to eliminate harassment of disabled persons that is related to their disabilities;

(c)

the need to promote equality of opportunity between disabled persons and other persons;

(d)

the need to take steps to take account of disabled persons’ disabilities, even where that involves treating disabled persons more favourably than other persons;

(e)

the need to promote positive attitudes towards disabled persons; and

(f)

the need to encourage participation by disabled persons in public life.”

“Disabled persons” are defined in section 1 of the Act as follows:

“… a person has a disability for the purposes of this Act … if he has a physical or mental impairment which has a substantial and long-term adverse effect on his ability to carry out normal day-to-day activities.”

As Mr Purchase rightly submitted, this is a broad definition which will clearly cover a substantial majority of residents in care homes and, certainly, in nursing homes.

In his skeleton argument, Mr Purchase sets out at length various judicial summaries of the relevant principles to be applied in connection with the public sector equality duty. For present purposes it will I think suffice if I set out the statement of principles formulated by Walker J in the case of R (W) v Birmingham City Council [2011] EWHC 1147 (Admin):

In this case, in purported fulfilment of its public sector equality duty, the Defendant.

Given the above conclusion, the proposed freeze was scored ‘2’ under the Equality Impact Assessment scheme, namely as an activity for the ‘general public’, designed as such or a systems adjustment within the local authority. This was reported to the Defendant’s Transformation Team to be incorporated in the Cabinet and Council report; Mrs Carney presumably relied upon that in reporting on the 16 December 2010 that “A High-Level Equality Impact assessment has been completed on the enclosed savings proposal and no disproportionate adverse impacts have been identified”.

Mr Purchase submits that Ms Holden’s evidence, even taking at face value, fails to show that the public sector equality duty was complied with and actually demonstrates the contrary, in that it is said that it shows a lack of necessary rigour, a failure to take into account all six statutory needs (the focus being on the need ‘to eliminate unlawful discrimination’); it is further said that there was inadequate consultation, that the analysis was in any event deficient and that the decision makers (the Council) were not adequately informed of the public sector equality duty, or of Ms Holden’s analysis or of the relevant factors that might be relevant to that duty.

It seems to me that Ms Holden’s conclusions are impugnable for the same reason that I have held the Council’s decision to freeze fees to be impugnable, namely the failure to investigate with the Claimants and have due regard to the actual costs of care. However, notwithstanding Mr Purchase’s arguments, it does seem to me that the Defendant is right in its submission that if the assessment of the usual cost of care is unimpeachable (i.e. undertaken in accordance with the requirements of the 1992 Directions and the statutory Guidance and the Agreement) then there is no further need for the Defendant to consider the public sector equality duty when fixing its fees. My reasons for this conclusion are as follows:

As Mr Bartley-Jones submitted and Kenneth Parker J has confirmed in the decision of JG and MB v Lancashire County Council [2011] EWHC 2295 (Admin): “in determining whether … the Defendant was acting consistently with the relevant statutory duty, it is necessary to examine carefully the circumstances in which the relevant decision was being made and the precise nature of the decision being taken” [paragraph 48].

In the present case what was being done was the fixing of the Defendant’s fees, which involved the determination of the “usual cost of care” in accordance with the 1992 Directions and Guidance.

It follows that I quash the decision dated 16 December 2010 and order the Defendant to reconsider the decision in the light of further submissions of the Claimants regarding the actual cost of care. When this judgment is formally handed down I shall of course consider the detailed contents of the order and other consequential matters.